AGREEMENT AND PLAN OF MERGER AND REORGANIZATION by and among IMPLANT SCIENCES CORPORATION ION METRICS, INC. ALL SHAREHOLDERS OF ION METRICS, INC. and DAVID J. FERRAN as Shareholder Representative April 10, 2008
Exhibit 2.1
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
by
and among
IMPLANT
SCIENCES CORPORATION
IMX
ACQUISITION CORP.
ION
METRICS, INC.
ALL
SHAREHOLDERS OF ION METRICS, INC.
and
XXXXX
X. XXXXXX
as
Shareholder Representative
April
10, 2008
- -
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
THIS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the “Agreement”) is made and entered into as of April 8, 2008 (the “Signing Date”), by
and among Implant Sciences Corporation, a Massachusetts corporation (“Parent”), IMX
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent (“Merger
Sub”), Ion Metrics, Inc., a California corporation (the “Company”), Xxxxxx X.
Xxxxxx (“X.
Xxxxxx”), Said Boumsellek, Xxxxxx Xxxxx and Xxxxx Xxx Xxxxxx, Trustee
1950 Trust, all the shareholders of the Company (each, a “Shareholder,” and
collectively, the “Shareholders”), and
Xxxxx X. Xxxxxx (the “Shareholder
Representative”).
RECITALS:
WHEREAS,
the Boards of Directors of each of Parent, Merger Sub and the Company believe it
is in the best interests of their respective companies and the shareholders or
stockholders, as applicable, of their respective companies that Parent acquire
the Company through the statutory merger of the Company with and into the Merger
Sub (the “Merger”)
and, in furtherance thereof, have approved this Agreement, the Merger and the
other transactions contemplated hereby;
WHEREAS,
pursuant to the Merger, the Company will merge with and into the Merger Sub
whereupon the separate corporate existence of the Company will cease and the
Merger Sub will continue as a wholly-owned subsidiary of Parent, and all of the
outstanding capital stock of the Company will be converted into shares of Common
Stock of Parent, all in the manner and upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS,
the Company and the Shareholders, on the one hand, and Parent and Merger Sub, on
the other hand, desire to make certain representations, warranties, covenants
and other agreements in connection with the Merger.
NOW,
THEREFORE, in consideration of the foregoing premises, the mutual agreements and
other covenants set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND
INTERPRETATIONS
1.1 Certain
Definitions
.
In addition to the capitalized terms defined above and elsewhere in this
Agreement, for all purposes of and under this Agreement, the capitalized terms
set forth below shall have the respective meanings ascribed thereto
below:
“Affiliate” shall
mean, as applied to any Person, (a) any other Person directly or indirectly
controlling, controlled by or under common control with, that Person, (b) any
other Person that owns or controls ten percent (10%) or more of any class of
equity securities (including any equity securities issuable upon the exercise of
any option or convertible security) of that Person or any of its affiliates, or
(c) as to a corporation, each director and officer thereof, and as to a
partnership, each general partner thereof, and as to a limited liability
company, each managing member or similarly authorized Person thereof (including
officers), and as to any other entity, each Person exercising similar authority
to those of a director or officer of a corporation. For the purposes
of this definition, “control” (including with correlative meanings, the terms
“controlling”, “controlled by”, and “under common control with”) as applied to
any Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person,
whether through ownership of voting securities or by contract or
otherwise.
“Agreement of Merger”
has the meaning ascribed thereto in Section 2.2.
“Ancillary Agreements”
shall mean the Escrow Agreement, Employment Agreements, Employment or Consulting
Acceptances, Consulting Agreement, Lock-Up Agreement, Assignment and Assumption
Agreement, Board Observer Rights Agreement and FS Agreement.
“Applicable Indemnification
Period” has the meaning ascribed thereto in Section 9.1.
“Assignment and Assumption
Agreement” has the meaning ascribed thereto in Section
7.9(c).
“Average Price” has
the meaning ascribed thereto in Section 9.3 (c).
“Basket Amount” has
the meaning ascribed thereto in Section 9.3(a).
“Board Observer Rights
Agreement” has the meaning ascribed thereto in Section
7.9(d).
“Boumsellek Employment
Agreement” has the meaning ascribed thereto in Section
7.9(g).
“Certificate of
Merger” has the meaning ascribed thereto in Section 2.2.
“CGCL” has the meaning
ascribed thereto in Section 2.1.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Commercially-Available
Licenses” has the meaning ascribed thereto in Section
3.12(d).
“Company
Authorizations” has the meaning ascribed thereto in Section
3.18.
“Company Employee”
shall mean any current or former director, any current or former employee, any
individual who is or was a consultant, or any individual who is or was
independent contractor of the Company or any ERISA Affiliate (including, without
limitation, all individuals who are or were classified by the Company as Form
1099 personnel).
“Company Financial
Statements” has the meaning ascribed thereto in Section 3.7.
“Company Indemnified
Party” has the meaning ascribed thereto in Section 9.2(b).
“Company Material Adverse
Effect” shall mean any
change, event or effect that has had, or is reasonably likely to have, an
adverse effect on the business, assets, liabilities, financial condition or
results of operations of the Company.
“Company Registered
Intellectual Property” has the meaning ascribed thereto in Section
3.12(a).
“Confidential Disclosure
Agreement” has the meaning ascribed thereto in Section 7.5.
“Conflict” has the
meaning ascribed thereto in Section 3.3.
“Consulting
Agreement” has the meaning ascribed thereto in Section
7.9(b).
“Contested Claim” has
the meaning ascribed thereto in Section 9.5(b).
“Contract” shall mean
any written or oral legally binding contract, agreement, instrument, commitment
or undertaking (including leases, licenses, mortgages, notes, guarantees,
sublicenses, subcontracts and purchase orders).
“Current Balance
Sheet” has the meaning ascribed thereto in Section 3.3.
“Current Balance Sheet
Date” has the meaning ascribed thereto in Section 3.3.
“DGCL” has the meaning
ascribed thereto in Section 2.1.
“Disclosure Schedule”
has the meaning ascribed thereto in Article 3.
“Effective Time” has
the meaning ascribed thereto in Section 2.2.
“Employment
Agreements” shall mean the Boumsellek Employment Agreement and the X.
Xxxxxx Employment Agreement.
“Employment or Consulting
Acceptances” has the meaning ascribed thereto in Section
7.7.
“Escrow Agent” shall
mean Computershare Trust Company, N.A. or another institution reasonably
acceptable to Parent and the Shareholders.
“Escrow Termination
Date” has the meaning ascribed thereto in Section 9.6.
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
“Excluded Liabilities”
has the meaning ascribed thereto in Section 7.9 (c).
“FS Agreement” has the
meaning ascribed thereto in Section 7.9(e).
“Governmental
Authority” shall mean any court, administrative agency or commission or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission.
“Hazardous Material”
has the meaning ascribed thereto in Section 3.20(a).
“Knowledge” (a) shall
mean with respect to an individual, the actual knowledge of such individual
after making a reasonable inquiry of any Person having responsibility for, or
expertise concerning, the subject matter to which the term “Knowledge” relates,
and (b) a Person (other than an individual) will be deemed to have “Knowledge”
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, manager, member, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
“Leased Real Property”
has the meaning ascribed thereto in Section 3.14(a).
“Liability” or “Liabilities” shall
mean any debt, liability or obligation, whether accrued or fixed, absolute or
contingent, matured or unmatured, determined or determinable, known or unknown,
including those arising under any law, action or governmental order and those
arising under any Contract.
“Lock-Up Agreement”
has the meaning ascribed thereto in Section 7.9(a).
“Losses” shall mean
all damages, costs, Liabilities, losses (including lost profits and diminution
in value), fines, penalties, Taxes, deficiencies and expenses, including
reasonable attorneys’ fees, other professionals’ and experts fees, costs of
investigation and court costs.
“Material Contracts”
has the meaning ascribed thereto in Section 3.15(a).
“Multiemployer Plan”
shall mean any “Pension Plan” which is a “multiemployer plan,” as defined in
Section 3(37) of ERISA.
“Notice of Claim” has
the meaning ascribed thereto in Section 9.4(a).
“Open Source
Materials” has the meaning ascribed thereto in Section
3.12(q).
“Parent 10-K” has the
meaning ascribed thereto in Section 4.4.
“Parent Disclosure
Schedule” has the meaning ascribed thereto in Article 5.
“Parent Indemnified
Party” has the meaning ascribed thereto in Section 9.2(a).
“Parent Intellectual
Property” shall mean any Intellectual Property and Intellectual Property
Rights that are owned by or licensed to Parent.
“Parent Material Adverse
Effect” shall mean any change, event or effect that has had, or is
reasonably likely to have, a material adverse effect on the business, assets,
liabilities, financial condition or results of operations of the Parent and its
subsidiaries, taken as a whole.
“Parent Plans” has the
meaning ascribed thereto in Section 7.8.
“Parent Options” has
the meaning ascribed thereto in Section 5.5(b).
“Parent SEC Documents”
has the meaning ascribed thereto in Section 5.6.
“Person” shall mean
any natural person, corporation, general partnership, limited partnership,
limited liability company or partnership, proprietorship, other business
organization, trust, union, association or Governmental Authority.
“Pro Rata Share” shall
mean with respect to a Shareholder a fraction whose numerator is the aggregate
number of shares of Company Common Stock held by such holder immediately prior
to the Effective Time, and whose denominator is the Total Outstanding
Shares.
“PTO” has the meaning
ascribed thereto in Section 3.12(a).
“X. Xxxxxx Employment
Agreement” has the meaning ascribed thereto in Section
7.9(f).
“Requisite Shareholder
Approval” has the meaning ascribed thereto in Section 3.2.
“Returns” has the
meaning ascribed thereto in Section 3.10.
“Securities Act” shall
mean the Securities Act of 1933, as amended.
“Signing Date” shall
mean the date of this Agreement.
“Shareholder” shall
mean any holder of shares of Company Common Stock immediately prior to the
Effective Time.
“Shareholder
Representative” has the meaning ascribed thereto in
preamble.
“Shareholder Representative
Expenses” has the meaning ascribed thereto in Section
9.8(b).
“Stock Exchange Ratio”
shall mean the quotient obtained by dividing (x) the
Merger Shares by (y) the Total Outstanding Shares.
“Surviving
Corporation” has the meaning ascribed thereto in Section
2.2.
“Third-Party Claims”
has the meaning ascribed thereto in Section 9.7.
“Total Outstanding
Shares” shall mean the aggregate number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time.
“Unresolved Claims”
has the meaning ascribed thereto in Section 9.6.
1.2 Certain
Interpretations
(a) When a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Articles, such reference shall be to an
Article of this Agreement unless otherwise indicated.
(b) The words
“include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation.”
(c) The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(d) Reference
to Parent shall be deemed to refer to Parent and its subsidiaries unless the
context otherwise requires.
(e) Reference
to the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(f) The
parties hereto agree that they have been represented by legal counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document shall be construed against
the party drafting such agreement or document.
ARTICLE 2
THE
MERGER
2.1 The
Merger
.
At the Effective Time and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of the Delaware General Corporation Law
(the “DGCL”)
and the General Corporation Law of the State of California (“CGCL”), the Company
shall be merged with and into the Merger Sub, the separate corporate existence
of the Company shall cease, and the Merger Sub shall continue as the surviving
corporation and as a wholly-owned subsidiary of Parent. The Merger
Sub, as the surviving corporation after the Merger, is sometimes referred to
herein as the “Surviving
Corporation.”
2.2 Closing and Effective
Time
.
Unless this Agreement is earlier terminated pursuant to Section 10.1, as promptly
as practicable following the satisfaction or waiver of the conditions set forth
in Article 8,
the parties hereto shall consummate the Merger and the other transactions
contemplated hereby at a closing (the “Closing”) to occur at the
offices of Ellenoff Xxxxxxxx & Schole LLP, unless another time or place is
mutually agreed upon in writing by Parent and the Company. The date
upon which the Closing shall actually occur shall be referred to herein as the
“Closing
Date.” On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a short form agreement of merger (the “Agreement of Merger”)
or a certificate of merger (the “Certificate of
Merger”) in customary form and substance with the Secretaries of State of
the States of Delaware and California in accordance with the applicable
provisions of the DGCL and CGCL (the time of acceptance of the later of such
filing by the Secretaries of State of the State of Delaware or the State of
California shall be referred to herein as the “Effective
Time”).
2.3 Legal Effect of the
Merger
.
At the Effective Time, the effect of the Merger shall be as provided under the
applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.4 Certificate of Incorporation
and Bylaws
.
From and after the Effective Time, (i) the Certificate of Incorporation of
Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation, unless and until altered, amended or repealed as provided in the
DGCL, and (ii) the by-laws of Merger Sub shall be the by-laws of the Surviving
Corporation, unless and until altered, amended or repealed as provided in the
DGCL, the Certificate of Incorporation or such by-laws.
2.5 Directors and
Officers
.
Parent shall have received a written resignation from each of the officers and
directors of the Company, effective as of the Effective Time.
(a) Directors. Unless
otherwise determined by Parent prior to the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation as of the Effective Time, each to hold the office of a
director of the Surviving Corporation in accordance with the provisions of the
DGCL and the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their successors are duly elected and qualified.
(b) Officers. Unless
otherwise determined by Parent prior to the Effective Time, the officers of
Merger Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation as of the Effective Time, each to hold office in
accordance with the provisions of the Bylaws of the Surviving
Corporation.
2.6 Capital Stock of Constituent
Corporations
.
(a) Merger Sub Capital
Stock. Each share of Common Stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock of the
Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(b) Company Common
Stock. On the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, each share of Company Common Stock that
is outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without the need for any further action on the part of the holder
thereof (except as expressly provided herein), be converted into and represent
the right to receive the number of shares of Parent Common Stock equal to the
Stock Exchange Ratio.
(c) Company-Owned Company Common
Stock. Notwithstanding the terms of Section 2.6(b), each
share of Company Common Stock held in treasury by the Company, if any,
immediately prior to the Effective Time shall be cancelled and extinguished
without any conversion thereof or consideration paid therefor.
(d) Company
Options. Effective as of the Effective Time, each Company
Option, if any, shall not be assumed nor substituted for by Parent, and each
Company Option that has not been exercised as of the Effective Time shall
terminate and cease to be outstanding immediately prior to the Effective
Time.
(e) Aggregation of
Holdings. The number of shares of Parent Common Stock to be
issued to each Shareholder in the Merger shall be a whole number calculated by
aggregating all shares of Company Common Stock held by such Shareholder, so that
such number of shares of Parent Common Stock to be issued shall be equal to the
number of shares of Company Common Stock held by such Shareholder multiplied by
the Stock Exchange Ratio rounded down to the nearest whole number, with cash
paid in lieu of any fractional share of Parent Common Stock pursuant to Section 2.6(h)
hereof. As of the Effective Time, all shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares or interests shall cease to have any rights with respect thereto, except
the right to receive such holder’s proportionate amount of the Merger Shares and
any cash in lieu of fractional shares of Parent Common Stock to be issued or
paid in consideration therefor upon surrender of such certificate, subject to
the Escrow Agreement.
(f) Merger Shares in
Escrow. Prior to the Effective Time, Parent, the Shareholders
and the Escrow Agent shall enter into an Escrow Agreement in substantially the
form attached hereto as Exhibit A (the “Escrow Agreement”),
which Escrow Agreement shall be effective upon Closing. At the
Effective Time, Parent shall cause to be deposited with the Escrow Agent a
certificate, together with stock powers duly endorsed by each Shareholder in
blank for transfer on behalf of such Shareholder, and each such Shareholder, by
his, her or its execution and delivery of this Agreement and/or approval of the
Merger, hereby authorizes and directs Parent to make such deposit on his, her or
its behalf, representing that number of Merger Shares to be issued in the Merger
to each such Shareholder as is set forth opposite such Shareholder’s name on the
Schedule of Escrow Shares (as such term is defined in the Escrow Agreement),
constituting in the aggregate, such number of shares of Parent Common Stock that
is equal to twenty percent (20%) of the total number of Merger Shares issuable
in the Merger (the “Escrow
Shares”). All calculations to determine the number of Merger
Shares to be delivered by Parent on behalf of each Shareholder into escrow as
aforesaid shall be rounded up to the nearest whole share. Such Escrow
Shares deposited with the Escrow Agent are sometimes referred to herein as the
“Escrow
Fund.”
(g) Certificate
Legends. The certificates evidencing shares of Parent Common
Stock to be issued pursuant to this Section 2.6 shall
bear the following legend (in addition to any other legend required by law,
including Rule 145 promulgated under the Securities Act):
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO, (II) IN COMPLIANCE WITH RULE 144, OR
(III) PURSUANT TO AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(h) Fractional
Shares. Notwithstanding anything to the contrary set forth
herein, no fraction of a share of Parent Common Stock will be issued, but in
lieu thereof, each Shareholder who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such Shareholder) shall be entitled to
receive from Parent an amount of cash (rounded to the nearest whole cent) equal
to the product of (i) such fraction, multiplied by (ii) the average closing sale
price of one share of Parent Common Stock as reported on the American Stock
Exchange for the ten (10) consecutive trading days ending one trading day
immediately preceding the Closing Date.
(i) Adjustments. The
definitions above shall be adjusted to reflect fully the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), or other distribution in respect of Parent Common Stock or
Company Common Stock, reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after the date
hereof and prior to the Effective Time (or, with respect to the Escrow Shares,
prior to distribution of the Escrow Shares in accordance with the Escrow
Agreement).
2.7 Dissenting
Shares
(a) Notwithstanding
any other provisions of this Agreement to the contrary, any shares of Company
Common Stock held by a holder who has demanded and perfected dissenters’ rights
for such shares in accordance with Chapter 13 of the CGCL and who, as of the
Effective Time, has not effectively withdrawn or lost such dissenters’ rights
(“Dissenting
Shares”), shall not be converted into or represent a right to receive the
consideration for Company Common Stock set forth in Section 2.6, but the
holder thereof shall only be entitled to such rights as are provided by the
CGCL.
(b) Notwithstanding
the provisions of Section 2.7(a), if
any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) such holder’s dissenters’ rights under the
CGCL, then, as of the later of the Effective Time or the occurrence of such
event, such holder’s shares shall automatically be converted into and represent
only the right to receive the consideration for Company Common Stock set forth
in Section 2.6,
without interest thereon, upon surrender of the certificate or certificates
representing such shares, and subject to the terms of the Escrow
Agreement.
(c) The
Company shall give Parent (i) prompt notice of any written demand for
dissenters’ rights received by the Company pursuant to the applicable provisions
of the CGCL, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to such demands. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any such demands or offer to settle or settle any such
demands.
2.8 Exchange of
Certificates
(a) Exchange
Procedures. On or promptly after the Closing Date, Parent
shall deliver to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding
shares of Company Common Stock (each, a “Company Certificate”)
certificates (each a “Parent Certificate”)
representing that number of Merger Shares that such holder has the right to
receive pursuant to Section 2.6 with
respect to such Company Certificate, after receipt by Parent of (i) such
Company Certificate for cancellation, (ii) an executed letter of transmittal, in
which, among other things, such holder agrees to be bound by Section 2.6(g) and
any other applicable restrictions on transfer of the Merger Shares represented
by such Parent Certificate(s), including restrictions relating to the Escrow
Agreement, and (iii) stock powers duly executed in blank to be delivered to the
Escrow Agent with respect to the Escrow Shares, together with such other
documents as may be reasonably required by Parent, and each Company Certificate
so surrendered shall forthwith be cancelled. Until surrendered as
contemplated by this Section 2.8, each
Company Certificate shall be deemed, on and after the Effective Time, to
represent only the right to receive upon such surrender, Parent Certificates
representing Merger Shares (subject to all escrow requirements contained in this
Agreement).
(b) Transfers of
Ownership. If any Parent Certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Company
Certificate surrendered in exchange therefor is registered on the books and
records of the Company, it will be a condition of the issuance or delivery
thereof that the Company Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other Taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Company Certificate surrendered, or established to the satisfaction of Parent or
any agent designated by it that such Tax has been paid or is not
payable.
(c) No
Liability. Notwithstanding anything to the contrary in this
Section 2.8,
none of the Parent, the Surviving Corporation or any other party hereto shall be
liable to a holder of shares of Company Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
2.9 No Further Ownership Rights
in Company Common Stock
.
The shares of Parent Common Stock paid in respect of the surrender for exchange
of shares of Company Common Stock in accordance with the terms hereof shall be
deemed to be full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Company Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 2.
2.10 Lost, Stolen or Destroyed
Certificates
.
In the event any Company Certificates evidencing shares of Company Common Stock
shall have been lost, stolen or destroyed, Parent shall issue in exchange for
such lost, stolen or destroyed Company Certificates, upon the making of an
affidavit of that fact by the holder thereof, such amount, if any, as may be
required pursuant to Section 2.6; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
holder of such lost, stolen or destroyed Company Certificates to either
(i) deliver a bond in such amount as it may reasonably direct, or
(ii) provide an indemnification agreement in a form and substance
acceptable to Parent, against any claim that may be made against Parent with
respect to the Company Certificates alleged to have been so lost, stolen or
destroyed.
2.11 Tax
Consequences. For federal income tax purposes, the parties
intend that the Merger be treated as a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall be, and is hereby,
adopted as a plan of reorganization for purposes of Section 368 of the
Code. The parties shall not take a position on any Tax Return
inconsistent with this Section
2.11.
2.12 Further
Assurances. If at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of Parent and the Surviving Corporation
shall be fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES
OF THE COMPANY AND THE
SHAREHOLDERS
The
Company and the Shareholders hereby, jointly and severally, represent
and warrant to Parent and Merger Sub, subject to such exceptions as are
disclosed in the disclosure schedule (referencing the appropriate section and
paragraph numbers or that are disclosed with respect to other sections or
paragraphs but it is readily apparent from such disclosure that such information
is applicable to another section or paragraph) supplied as of the date hereof by
the Company to Parent (the “Disclosure Schedule”), as
follows:
3.1 Organization
.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Company has
the corporate power to own its properties and to carry on its business as
currently conducted. The Company is duly qualified or licensed to do
business and in good standing as a foreign corporation in each jurisdiction in
which such qualification or license is required. The Company has
delivered a true and correct copy of its Articles of Incorporation and Bylaws,
each as amended to date and in full force and effect on the date hereof, to
Parent. Section 3.1 of the
Disclosure Schedule contains a complete and accurate list of the directors and
officers of the Company as of the date hereof. The operations now
being conducted by the Company are not now and have never been conducted by the
Company under any other name. Section 3.1 of the
Disclosure Schedule also contains a complete and accurate list of every state or
foreign jurisdiction in which the Company has employees or
facilities.
3.2 Authority
.
The Company has all requisite corporate power and authority to enter into this
Agreement and any Ancillary Agreements to which it is a party and to consummate
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and any Ancillary Agreements to which the Company is
a party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company and no further action is required on the part of the Company to
authorize the Agreement and any Ancillary Agreements to which it is a party and
the transactions contemplated hereby and thereby. The approval of the
principal terms of the Merger by holders of a majority of the outstanding shares
of Company Common Stock (the “Requisite Shareholder
Approval”) are the only approvals of the Shareholders that are necessary
to consummate the Merger and the other transactions contemplated hereby under
the CGCL, the Articles of Incorporation and Bylaws of the Company and any
Contract to which the Company is a party or otherwise bound. The
Board of Directors of the Company has unanimously approved this Agreement, the
Merger and the other transactions contemplated hereby. This Agreement
and each of the Ancillary Agreements to which the Company is a party has been
duly executed and delivered by the Company and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and similar
laws, both state and federal, affecting the enforcement of creditors’ rights or
remedies in general as from time to time in effect or (ii) the exercise by
courts of equity powers.
3.3 Conflicts
.
The execution and delivery by the Company of this Agreement and any Ancillary
Agreement to which the Company is a party, and the consummation of the
transactions contemplated hereby and thereby, will not (a) conflict with or
result in any violation of or default under (with or without notice or lapse of
time, or both) or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a “Conflict”) (i) any
provision of the Articles of Incorporation and Bylaws of the Company,
(ii) any Contract to which the Company is a party or any of its properties
or assets is subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its properties
or assets or (b) result in the imposition or creation of any Lien upon or
with respect to any of the assets owned or used by the Company.
3.4 Consents
.
No consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority or any third party,
including a party to any Contract with the Company (so as not to trigger any
Conflict), is required by or with respect to the Company in connection with the
execution and delivery of this Agreement and any Ancillary Agreement to which
the Company is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) the Requisite Shareholder Approval, (ii) the
filing of the Agreement of Merger or the Certificate of Merger with the
Secretaries of State of the States of Delaware and California, and (iii) as set
forth in Section
3.4 of the Disclosure Schedule. Section 3.4 of the
Disclosure Schedule sets forth a complete and accurate list of all consents,
waivers and approvals of parties to any Contract as are required thereunder in
connection with the Merger, or for any such Contracts to remain in full force
and effect without limitation, modification or alteration after the Effective
Time so as to preserve all rights of, and benefits to, the Surviving Corporation
under such Contracts from and after the Effective Time.
3.5 Company Capital
Structure
. (a) The
authorized capital stock of the Company consists of one million (1,000,000)
shares of Common Stock. As of the date hereof, the capitalization of
the Company is as set forth in Section 3.5(a) of the
Disclosure Schedule. The total number of shares of Company Common
Stock outstanding as of the date hereof, the total number of shares underlying
each security convertible into, or exercisable or exchangeable for, shares of
Company Common Stock outstanding as of the date hereof and the total number of
shares underlying all Company Options outstanding as of the date hereof is as
set forth in Section 3.5(a) of the
Disclosure Schedule. The Company Common Stock is held by the Persons
with the domicile addresses and in the amounts set forth in Section 3.5(a) of the
Disclosure Schedule. All outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of the Company, or any agreement to which the Company is a party or by
which it is bound. All outstanding shares of Company Common Stock and
Company Options have been issued or repurchased (in the case of shares that were
outstanding and repurchased by the Company or any Shareholder of the Company) in
compliance with all applicable federal, state, foreign, or local statues, laws,
rules, or regulations, including federal and state securities
laws. The Company has not, and will not have, suffered or incurred
any Liability relating to or arising out of the issuance or repurchase of any
Company Common Stock or Company Options, or out of any agreements or
arrangements relating thereto. There are no declared or accrued but
unpaid dividends with respect to any shares of Company Common
Stock. The Company has no other capital stock authorized, issued or
outstanding. No vesting provisions, repurchase options, risks of
forfeiture or other conditions under any applicable stock restriction agreement
or other agreement with the Company that are applicable to any shares of Company
Common Stock, Company Options or to any other rights to purchase Company Common
Stock, will accelerate as a result of the Merger or as a result of any other
events (whether or not associated with the Merger). No shares of
Company Common Stock are unvested or subject to a repurchase option, risk of
forfeiture or other condition under any applicable stock restriction agreement
or other agreement with the Company.
(b) The
Company has never adopted or maintained any stock option plan or other plan
providing for equity compensation of any Person. There are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is bound
obligating the Company to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the
Company. Except as contemplated hereby, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of the Company.
3.6 Subsidiaries
.
The Company does not have, and has never had, any subsidiaries or any “affiliated”
companies (within the meaning of Rule 145 promulgated under the Securities Act)
and does not otherwise own, and has never otherwise owned, any shares of capital
stock or any interest in, or control, directly or indirectly, any other
corporation, limited liability company, partnership, limited liability
partnership, association, joint venture or other business entity.
3.7 Company Financial
Statements
.
Section 3.7 of the
Disclosure Schedule sets forth the Company’s unaudited balance sheet as of
January 31, 2008, and the related unaudited statement of income, cash flow and
shareholders’ equity for the one-month period then ended, and the unaudited
balance sheet as of December 31, 2007 and the related unaudited statements
of income, cash flow and shareholders’ equity for the twelve-month period then
ended (the “Company
Financial
Statements”). The Company Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated and consistent with each other (except that the unaudited
Company Financial Statements do not contain footnotes and other presentation
items that may be required by GAAP). The Company Financial Statements
present fairly in all material respects the Company’s financial condition and
operating results as of the dates and during the periods indicated
therein. The Company’s unaudited balance sheet as of January 31,
2008, is referred to hereinafter as the “Current
Balance Sheet” and the date thereof is referred to herein as the “Current Balance Sheet
Date.” The Company maintains and shall continue to maintain an
adequate system of internal controls established and administered in accordance
with GAAP.
3.8 No Undisclosed
Liabilities;
Indebtedness
.
The Company has no Liability that would be required to be reflected in financial
statements prepared in accordance with GAAP except Liabilities
(i) reflected in the Current Balance Sheet, or (ii) incurred in the
ordinary course of business consistent with past practices since the Current
Balance Sheet Date and through the Signing Date, which do not exceed $20,000 in
the aggregate.
3.9 No
Changes
.
From the Current Balance Sheet Date through the date hereof, except with respect
to the transactions contemplated hereby, (a) the business of the Company has
been conducted in the ordinary course and consistent with past practices, (b)
there has not been any employment dispute, including any claims or matters
raised by any individuals or any workers’ representative organization or union
regarding labor trouble or claim of wrongful discharge or other unlawful
employment or labor practice or action with respect to the Company, (c) there
has not been any destruction of, damage to, or loss of any material assets or
business of the Company, (d) there has not been any claims, proceedings or
actions, whether asserted or unasserted, contingent or otherwise, in respect of
the Company Intellectual Property, and (e) the Company has not taken any of the
actions described in paragraphs (i) through (xxi) of Section 6.1(b)
hereof.
3.10 Taxes
(a) As of the
Closing Date, the Company will have (i) prepared and timely filed all
federal, state, local and foreign returns for the tax year ended December 31,
2007, all final federal, state, local and foreign returns for the period
commencing January 1, 2008 through the Closing Date, and all other required
federal, state, local and foreign returns, estimates, information statements and
reports (“Returns”) relating to any
and all Taxes concerning or attributable to the Company or its operations and
such Returns are or will be true and correct in all respects and have been or
will be completed in accordance with applicable law in all respects and
(ii) timely paid or accrued on its books all Taxes it is required to
pay.
(b) As of the
Closing Date, the Company will have timely paid or withheld with respect to
Company Employees all federal, state, local and foreign income taxes and social
security charges and similar fees, Federal Insurance Contribution Act, Federal
Unemployment Tax Act and other Taxes required to be withheld, and will have
timely paid such Taxes withheld over to the appropriate
authorities.
(c) The
Company has not been delinquent in the payment of any Tax, nor is there any Tax
deficiency outstanding, assessed or proposed against the Company, nor has the
Company executed any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(d) No audit
or other examination of any Return of the Company is presently in progress, nor
has the Company been notified of any request for such an audit or other
examination.
(e) The
Company has no liabilities for unpaid Taxes which have not been accrued or
reserved on the Current Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has not incurred any liability for
Taxes since the date of the Current Balance Sheet other than in the ordinary
course of business.
(f) The
Company has made available to Parent or its legal counsel copies of all Tax
Returns for the Company filed for all periods since its inception.
(g) There are
(and immediately following the Effective Time there will be) no Liens on the
assets of the Company relating to or attributable to Taxes other than Liens for
Taxes not yet due and payable.
(h) The
Company has no Knowledge of any basis for the assertion of any claim relating or
attributable to Taxes that, if adversely determined, would result in any Lien on
the assets of the Company.
(i) None of
the Company’s assets is treated as “tax-exempt use property,” within the meaning
of Section 168(h) of the Code.
(j) The
Company has not filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(4) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4)
of the Code) owned by the Company.
(k) The
Company has (a) never been a member of an affiliated group (within the
meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other
than a group the common parent of which was Company), (b) never been a
party to any Tax sharing, indemnification or allocation agreement, (c) no
liability for the Taxes of any Person (other than Company) under Treasury
Regulation § 1.1502-6 (or any similar provision of state, local or foreign law),
as a transferee or successor, by contract or agreement, or otherwise and
(d) never been a party to any joint venture, partnership or other
arrangement that could be treated as a partnership for Tax
purposes.
(l) The
Company has not been, at any time, a “United States Real Property Holding
Corporation” within the meaning of Section 897(c)(2) of the
Code.
(m) No
adjustment relating to any Return filed by the Company has been proposed
formally or, to the Knowledge of the Company, informally by any tax authority to
the Company or any representative thereof.
(n) The
Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code.
(o) No claim
has ever been made by a taxing authority in a jurisdiction where the Company
does not file Returns that it is or may be subject to taxation by that
jurisdiction.
(p) The
Company does not have and has not had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country.
(q) None of
the outstanding indebtedness of the Company constitutes indebtedness with
respect to which any interest deductions may be disallowed under
Sections 163(i), 163(l) or 279 of the Code or under any other provision of
applicable law.
(r) The
Company has not engaged in a transaction that is the same as or substantially
similar to one of the types of transactions that the Internal Revenue Service
has determined to be a tax avoidance transaction and identified by notice,
regulation, or other form of published guidance as a listed transaction, as set
forth in Treasury Regulation §1.6011-4(b)(2).
(s) The
Company will not be required to include any income or gain or exclude any
deduction or loss from taxable income as a result of any (a) change in method of
accounting under Section 481(c) of the Code, (b) closing agreement under
Section 7121 of the Code, (c) deferred intercompany gain or excess loss
account under Treasury Regulations under Section 1502 of the Code (or in
the case of each of (a), (b), and (c), under any similar provision of applicable
law), (d) installment sale or open transaction disposition or (e) prepaid
amount.
(t) No
Shareholder holds shares of Company Common Stock that are non-transferable and
subject to a substantial risk of forfeiture within the meaning of
Section 83 of the Code with respect to which, to the Knowledge of the
Company, a valid election under Section 83(b) of the Code has not been
made, and no payment to any Shareholder of any portion of the consideration
payable pursuant to this Agreement will result in compensation or other income
to such Shareholder with respect to which Parent, the Company or any subsidiary
of Parent or the Company would be required to deduct or withhold any
Taxes.
3.11 Employee Benefit Plans and
Compensation
(a) Section 3.11(a) of the
Disclosure Schedule contains a complete and accurate list of each Company
Employee Plan, each Employee Agreement under each Company Employee Plan, and
each Employee Agreement. Neither the Company nor any ERISA Affiliate
has made any plan or commitment to establish any new Company Employee Plan or
Employee Agreement, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to adopt or enter into any Company Employee Plan or Employee
Agreement. Section 3.11(a) of the
Disclosure Schedule sets forth a table setting forth the name and compensation
of each Company Employee.
(b) The
Company has provided to Parent (i) correct and complete copies of all
documents embodying each Company Employee Plan and each Employee Agreement
including, without limitation, all amendments thereto and all related trust
documents, administrative service agreements, group annuity contracts, group
insurance contracts, and policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Company Employee Plan, (ii) the three (3)
most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan, (iii) if the Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets, (iv) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan, (v) all
communications material to any Company Employee or Company Employees relating to
any Company Employee Plan and any proposed Company Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company, (vi) all correspondence
to or from any governmental agency relating to any Company Employee Plan,
(vii) all standard COBRA forms and related notices, (viii) the most
recent annual actual valuations, if any, prepared for each Company Employee
Plan, (ix) all discrimination tests for each Company Employee Plan for the
three (3) most recent plan years, and (x) all IRS determination, opinion,
notification and advisory letters with respect to each Company Employee Plan, if
any.
(c) The
Company and its ERISA Affiliates have performed in all material respects all
obligations required to be performed by them under each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code. Any Company Employee Plan intended to
be qualified under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has obtained a favorable
determination, notification, advisory and/or opinion letter, as applicable, as
to its qualified status from the IRS. For each Company Employee Plan
that is intended to be qualified under Section 401(a) of the Code there has
been no event, condition or circumstance that has adversely affected or is
likely to adversely affect such qualified status. No “prohibited
transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Company Employee
Plan. There are no actions, suits or claims pending, or, to the
Knowledge of the Company, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan. Each Company Employee Plan can
be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, Company or any of its
ERISA Affiliates (other than ordinary administration expenses). There
are no audits, inquiries or proceedings pending or, to the Knowledge of the
Company or any ERISA Affiliates, threatened by the IRS or any other Governmental
Authority with respect to any Company Employee Plan. Neither the
Company nor any Affiliate is subject to any penalty or tax with respect to any
Company Employee Plan under Section 502(i) of ERISA or Sections 4975
through 4980 of the Code. The Company and each ERISA Affiliate have
timely made all contributions and other payments required by and due under the
terms of each Company Employee Plan.
(d) Neither
the Company nor any ERISA Affiliate has ever maintained, established, sponsored,
participated in, or contributed to, any (i) Pension Plan which is subject to
Title IV of ERISA or Section 412 of the Code, (ii) Multiemployer Plan,
(iii) plan described in Section 413 of the Code, or (iv) a “funded
welfare plan” within the meaning of Section 419 of the Code. No
Company Employee Plan provides health benefits that are not fully insured
through an insurance contract.
(e) No
Company Employee Plan or Employee Agreement provides, or reflects or represents
any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any Person for any reason, except as may be
required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Company Employee (either individually or to Company Employees as a group) or any
other Person that such Company Employee(s) or other Person would be provided
with retiree life insurance, retiree health or other retiree employee welfare
benefits, except to the extent required by statute.
(f) The
Company and each Affiliate has, prior to the Effective Time, complied in all
materials respects with the health care continuation requirements of COBRA,
FMLA, HIPAA, the Women’s Health and Cancer Rights Act of 1998, the Newborns’ and
Mothers’ Health Protection Act of 1996, and any similar provisions of state law
applicable to Company Employees.
(g) The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Company Employee.
(h) No
payment or benefit which has been, will or may be made by the Company or its
Affiliates with respect to any Company Employee or any other “disqualified
individual” (as defined in Section 280G of the Code and the regulations
thereunder) will be characterized as a “parachute payment,” within the meaning
of Section 280G(b)(2) of the Code.
(i) The
Company: (i) is in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Company Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment
to any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Company Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, reasonably anticipated, or
to the Knowledge of the Company, threatened claims or actions against the
Company under any worker’s compensation policy or long-term disability
policy. The Company does not have any direct or indirect liability
with respect to any misclassification of any Person as an independent contractor
rather than as an employee, or with respect to any employee leased from another
employer. The services provided by each of the Company Employees is
terminable at the will of the Company and any such termination would result in
no liability to the Company.
(j) No work
stoppage or labor strike against the Company or any Affiliate is pending,
reasonably anticipated or, to the Knowledge of the Company,
threatened. The Company does not know of any activities or
proceedings of any labor union to organize any Company
Employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the Knowledge of the Company, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Company Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. The Company is not presently, nor has it been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Company Employees and no collective bargaining
agreement is being negotiated with respect to Company Employees. The
Company has not incurred any material liability or material obligation under the
Work Adjustment and Retraining Notification Act or any similar state or local
law which remains unsatisfied.
3.12 Intellectual
Property
. (a) Section 3.12(a) of the
Disclosure Schedule contains a complete and accurate list of (i) all
Registered Intellectual Property owned by, or filed in the name of, the Company
(the “Company
Registered Intellectual Property”), (ii) all other Company Intellectual
Property, and (iii) any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the “PTO”) or
equivalent authority anywhere in the world) related to any of the Company
Intellectual Property, including all actions required to be taken by the Company
within one hundred twenty (120) days following the Closing
Date.
(b) To the
Knowledge of the Company, each item of Company Intellectual Property owned by
the Company including all Company Registered Intellectual Property listed in
Section 3.12(a) of the
Disclosure Schedule, and to the Company’s Knowledge, each item of Company
Intellectual Property licensed to the Company, is free and clear of any
Liens. The Company is the sole owner of all Company Intellectual
Property in which the Company has ownership rights and has valid license rights
in all Company Intellectual Property licensed to the
Company.
(c) To the
extent that any Intellectual Property has been developed or created on behalf of
the Company independently or jointly by any person other than the Company, the
Company has a written agreement with such person with respect thereto, and the
Company thereby has obtained ownership of, and is the exclusive owner of, all
such Intellectual Property therein and associated Intellectual Property Rights
by operation of law or by valid assignment, and has required the waiver of all
non-assignable rights, including but not limited to, all author or moral
rights. Section 3.12(c) of
the Disclosure Schedule contains a complete and accurate list of all such
written agreements.
(d) The
Company has not transferred ownership of, or granted any license of
or right to use, or authorized the retention of any rights to use or joint
ownership of, any Company Intellectual Property, to any other
Person.
(e) Other
than “shrink-wrap” and similar widely available binary code and commercial
end-user licenses with license fees under $5,000 (“Commercially-Available
Licenses”), but not including Open Source Materials, the Company
Intellectual Property constitutes all the Intellectual Property and Intellectual
Property Rights used in or necessary for the conduct of the business of the
Company as it currently is conducted, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
services (including products, technology or services currently under
development).
(f) Other
than Commercially-Available Licenses, but not including Open Source Materials,
Section 3.12(f) of the
Disclosure Schedule contains a complete and accurate list of all Contracts to
which the Company is a party and pursuant to which the Company (A) grants any
rights to any third party under or with respect to any Company Intellectual
Property; and (B) is granted any rights under the Intellectual Property Right of
any third party. No third party who has licensed Intellectual
Property or Intellectual Property Rights to the Company has ownership rights or
license rights to improvements made by the Company to such Intellectual Property
that are made within the scope of the license.
(g) Other
than Commercially-Available Licenses, but not including public or open source
technology, Section 3.12(g) of the
Disclosure Schedule contains a complete and accurate list of all Contracts
between the Company and any other Person wherein or whereby the Company has
agreed to, or assumed, any obligation or duty to defend, indemnify, reimburse,
hold harmless, or guaranty such other Person with respect to the actual or
alleged infringement or misappropriation by the Company or such other Person of
the Intellectual Property Rights of any Person other than the
Company.
(h) The operation of the business of the Company as it
currently is conducted, including but not limited to the design, development,
use, import, manufacture and sale of the products, technology or services
(including products, technology or services currently under development)
of the Company, does not, to the Knowledge of the Company, infringe or
misappropriate the Intellectual Property Rights of any Person, violate the
rights of any Person (including rights to privacy or publicity), or constitute
unfair competition or trade practices under the laws of any jurisdiction in
which the Company conducts business or in which the Company sells or offers for
sale, directly or indirectly, products or services. The Company has
not received any notice from any Person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property Rights of any Person or constitutes unfair competition or
trade practices under the laws of any jurisdiction in which the Company conducts
business or in which the Company sells or offers for sale, directly or through
licensees or distributors, products or services, nor does Company have any
Knowledge of any basis therefor.
(i) Each item
of Company Intellectual Property is valid and subsisting (other than pending
applications for Company Registered Intellectual Property), and all necessary
registration, maintenance and renewal fees in connection with such Company
Registered Intellectual Property have been paid and all necessary documents and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Company Registered Intellectual
Property. Other than as set forth in Section 3.12(a) of the
Disclosure Schedule, there are no actions that must be taken by the Company
within one hundred twenty (120) days after the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property. In each case in which the Company has acquired ownership of
any Intellectual Property Rights from any Person, the Company has obtained a
valid and enforceable assignment sufficient to irrevocably transfer all rights
in such Intellectual Property and the associated Intellectual Property Rights
(including the right to seek past and future damages with respect thereto) to
the Company and, to the maximum extent provided for by, and in accordance with,
applicable laws and regulations, the Company has recorded each such assignment
with the relevant governmental authorities, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be, and all such assignments are set forth in
Section 3.12(a)
of the Disclosure Schedule.
(j) There are
no Contracts between the Company and any other Person with respect to Company
Intellectual Property or other Intellectual Property used in or necessary to the
conduct of the business as it is currently conducted under which there is any
dispute regarding the scope of such Contract, or performance under such Contract
including with respect to any payments to be made or received by the Company
thereunder.
(k) Neither
the execution of this Agreement by the Company nor the transactions contemplated
by this Agreement, including the assignment to Parent by operation of law or
otherwise of any Contracts to which the Company is a party, will result in
(i) Parent, Merger Sub, the Company or the Surviving Corporation granting
to any third party any right to or with respect to any Intellectual Property
owned by, or licensed to, any of them under any Contract to which the Company is
a party or by which it is bound, (ii) Parent, Merger Sub, the Company or
the Surviving Corporation being bound by, or subject to, any non-compete or
other material restriction on the operation or scope of their respective
businesses under any Contract to which the Company is a party or by which it is
bound, or (iii) Parent, Merger Sub, the Company or the Surviving
Corporation being obligated to pay any royalties or other material amounts to
any third party under any Contract to which the Company is a party or by which
it is bound in excess of those payable by any of them, respectively, in the
absence of this Agreement or the transactions contemplated hereby.
(l) To the
Knowledge of the Company, no Person or entity is infringing or misappropriating
any Company Intellectual Property.
(m) The
Company has taken all reasonable steps that are required or necessary to protect
the Company’s rights in confidential information and trade secrets of the
Company or provided by any other Person or entity to the
Company. Without limiting the foregoing, the Company has, and
enforces, a policy requiring each employee, consultant, and contractor to
execute proprietary information, confidentiality and assignment agreements
substantially in the Company’s standard forms, and all current and former
employees, consultants and contractors of the Company have executed such an
agreement in substantially the Company’s standard form, a copy of which has been
delivered to Parent. Set forth in Section 3.12(m) of
the Disclosure Schedule is a complete and accurate list of all such agreements
entered into by the Company and its current and former employees, consultants
and contractors.
(n) As of the
date of this Agreement, to the Knowledge of the Company, no Company Intellectual
Property is subject to any proceeding or outstanding decree, order, judgment or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(o) To the
Knowledge of the Company, no (i) product, technology, service or
publication of the Company, (ii) material published or distributed by the
Company, or (iii) conduct or statement of the Company constitutes obscene
material, a defamatory statement or material, false advertising or otherwise
violates any law or regulation of any jurisdiction in which the Company conducts
business or in which the Company sells or offers for sale, directly or through
licensees or distributors, products and services.
(p) No
government funding, facilities or resources of a university, college, other
educational institution or research center or funding from third parties was
used in the development of the Company Intellectual Property, and no
Governmental Authority, university, college, other educational institution or
research center has any claim or right in or to the Company Intellectual
Property. No current or former employee, consultant or independent
contractor of the Company who was involved in, or who contributed to, the
creation or development of any Company Intellectual Property, has performed
services for the government, a university, college or other educational
institution, or a research center, during a period of time during which such
employee, consultant or independent contractor was also performing services for
the Company.
(q) Section 3.12(q) of the
Disclosure Schedule contains a complete and accurate list of all Intellectual
Property of the Company, of a third party or in the public domain that
constitutes open source, public source or freeware Intellectual Property, or any
modification or derivative thereof, including any version of any software
licensed pursuant to any GNU general public license or limited general public
license (“Open Source
Materials”) that was used in, incorporated into, integrated or bundled
with any Intellectual Property that is, or was, used by the Company in its
business, or incorporated in or used in the development or compilation of any
products or technology of the Company, and describes the manner in which such
Open Source Materials were used (such description shall include whether (and, if
so, how) the Open Source Materials were modified and/or distributed by the
Company).
(r) The
Company has not (i) incorporated Open Source Materials into, or combined Open
Source Materials with, any Company products or technology, (ii) distributed Open
Source Materials in conjunction with any Company Intellectual Property or
Company products or technology, or (iii) used Open Source Materials in such a
way that, with respect to (i) or (ii) creates, or purports to create,
obligations for the Company with respect to any Company Intellectual Property or
grants, or purports to grant, to any third party, any rights or immunities under
any Company products or technology (including, but not limited to, using any
Open Source Materials that require, as a condition of use, modification and/or
distribution of such Open Source Materials that other software incorporated
into, derived from or distributed with such Open Source Materials be (A)
disclosed or distributed in source code form, (B) be licensed for the purpose of
making derivative works, or (C) be redistributable at no charge).
(s) The
Company has secured all export licenses necessary or appropriate for the
distribution of the Company’s products, services and technology outside of the
United States in any jurisdiction in which the Company conducts business or in
which the Company sells or offers for sale, directly or through licensees or
distributors, products and services, and all such licenses are in full force and
effect.
(t) The
Company’s products do not contain any virus, Trojan horse, worm or other
software routines or hardware components designed to permit unauthorized access,
to disable, erase or otherwise harm software, hardware or data.
3.13 Restrictions on Business
Activities
.
Section 3.13 of the
Disclosure Schedule sets forth a complete and accurate list of each Contract
(non-competition or otherwise), judgment, injunction, order or decree to which
the Company is a party or otherwise binding upon the Company which has or may
reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company (including any restrictions on selling,
licensing, manufacturing or otherwise distributing any of its technology or
products or from providing services to customers or potential customers or any
class of customers, in any geographic area, during any period of time, or in any
segment of the market, any acquisition of property (tangible or intangible) by
the Company, the conduct of business by the Company, or otherwise limiting the
freedom of the Company to engage in any line of business or to compete with any
Person.)
3.14 Properties
(a) The
Company does not own any real property, nor has the Company ever owned any real
property. Section 3.14(a) of the
Disclosure Schedule sets forth a complete and accurate list of all real property
currently leased by the Company or otherwise used or occupied by the Company for
the operation of the Company’s business (the “Leased Real Property”), the
name of the lessor, the name and date of each lease agreement related thereto
and each amendment thereto. The Company has provided Parent true,
correct and complete copies of all leases, lease guaranties, subleases,
agreements for the leasing, use or occupancy of, or otherwise granting a right
in or relating to the Leased Real Property, including all amendments,
terminations and modifications thereof, and there are no other lease agreements
for real property affecting the real property or to which Company is
bound. All such lease Contracts are valid and enforceable and not in
default, no rentals are past due, and no circumstance exists, which, with
notice, the passage of time or both, could constitute a default under any such
lease agreement. The Company has received no notice of a default,
alleged failure to perform, or any offset or counterclaim with respect to any
such lease agreement, which has not been fully remedied and
withdrawn. The consummation of the Merger and the other transactions
contemplated hereby will not affect the enforceability against any Person of any
such lease agreement or the rights of the Company or the Surviving Corporation
to the continued use and possession of the real property for the conduct of
business as presently conducted. The Leased Real Property is in good
operating condition and repair, free from structural, physical and mechanical
defects, is maintained in a manner consistent with standards generally followed
with respect to similar properties, and is structurally sufficient and otherwise
suitable for the conduct of the business as presently
conducted.
(b) The
Company has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used or held for use in its business, free and clear
of any Liens, except Liens for Taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which do not detract from the
value or interfere with the present use of the property subject thereto or
affected thereby. The foregoing assets and the Company Intellectual
Property constitute all of the assets used in, and necessary for, the business
of the Company as currently conducted or currently contemplated to be
conducted.
(c) Section 3.14(c) of the
Disclosure Schedule contains a complete and accurate list of all material items
of equipment owned or leased by the Company, and such equipment is adequate for
the conduct of the business of the Company as currently conducted and as
currently contemplated to be conducted and in good operating condition,
regularly and properly maintained, subject to normal wear and tear.
(d) The
Company has sole and exclusive ownership, free and clear of any Liens, of all
customer lists, customer contact information, customer correspondence and
customer purchasing histories relating to its current and former customers not
reserved by such customer. No Person other than the Company possesses
any claims or rights with respect to use of such customer
information.
3.15 Material
Contracts
(a) Section 3.15 of the
Disclosure Schedule sets forth a complete and accurate list of the following
Contracts in effect as of the date hereof (together with the Contracts set forth
in Section 3.12(f) and (g) (Intellectual
Property), Section 3.13
(Restrictions on Business Activities) or Section 3.14(a) (Leases),
of the Disclosure Schedule,
a “Material
Contract” and, collectively, the “Material
Contracts”):
(i) any
employment or consulting Contract with an employee or individual consultant or
salesperson, or consulting or sales Contract with a firm or other
organization;
(ii) any
Contract or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(iii) any
Contract relating to the lease of personal property involving future payments in
excess of $10,000 individually or $20,000 in the
aggregate;
(iv) any
Contract relating to capital expenditures and involving future payments in
excess of $10,000 individually or $20,000 in the aggregate;
(v) any
Contract relating to the disposition or acquisition of assets or any interest in
any business enterprise outside the ordinary course of the Company’s
business;
(vi) any
mortgages, indentures, guarantees, loans or credit agreements, security
agreements or other Contracts relating to the borrowing of money or extension of
credit (other than trade payables in the ordinary course of business consistent
with past practices);
(vii) any
Contract for the purchase by the Company of goods or services involving in
excess of $10,000 individually or $20,000 in the aggregate;
(viii) any
Contract for the purchase by customers of goods or services involving in excess
of $10,000 individually or $20,000 in the aggregate;
(ix) any
dealer, distribution, joint marketing, strategic alliance or development
Contract;
(x) any
standstill or similar Contract;
(xi) any
non-employee sales representative, original equipment manufacturer,
manufacturing, value added, remarketer, reseller, or other Contract for use or
distribution of the Company’s products, technology or services;
(xii) any
Contract (a) of a nature required to be disclosed on Section 3.21 of the
Disclosure Schedule, or (b) granting a power of attorney, agency or similar
authority to another person or entity; or
(xiii) any other
Contract that (a) involves future payments in excess of $10,000
individually or $20,000 in the aggregate or more and is not cancelable without
penalty within thirty (30) days, (b) has an unexpired term as of the
Current Balance Sheet Date in excess of twelve months and is not otherwise
listed on Section
3.15 of the Disclosure Schedule, or (c) is otherwise material to the
business of the Company and not otherwise listed on Section 3.15 of the
Disclosure Schedule.
(b) The
Company is in compliance with and has not breached, violated or defaulted under,
or received notice that it has breached, violated or defaulted under, any of the
terms or conditions of any Material Contract, nor does the Company have any
Knowledge of any event that would constitute such a breach, violation or default
with the lapse of time, giving of notice or both. Each Material
Contract is in full force and effect, enforceable in accordance with its terms,
and the Company is not in default thereunder, nor to the Knowledge of the
Company, is any party obligated to the Company pursuant to any such Material
Contract in default thereunder. Following the Effective Time, the
Surviving Corporation will be permitted to exercise all of its rights under the
Material Contracts without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay pursuant to the terms of such Material
Contracts had the transactions contemplated by this Agreement not
occurred.
3.16 Insurance
.
Section 3.16 of the
Disclosure Schedule contains a complete and accurate list of all insurance
policies and bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company or any of its
Affiliates (the “Insurance
Policies”). There is no claim by the Company or any of its
Affiliates pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed or that the Company or any of its Affiliates
has a reason to believe will be denied or disputed by the underwriters of such
policies or bonds. In addition, there is no pending claim of which
its total value (inclusive of defense expenses) will exceed the policy
limits. All premiums due and payable under all such policies and
bonds have been paid, (or if installment payments are due, will be paid if
incurred prior to the Closing Date) and the Company and its Affiliates are
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance
coverage). The Company has no Knowledge or reasonable belief of
threatened termination of, or premium increase with respect to, any of such
policies.
3.17 Litigation
.
There is no action, suit, claim or proceeding of any nature pending, or to the
Knowledge of the Company, threatened, against the Company, its properties
(tangible or intangible) or any of its officers or directors (in their capacity
as such), nor to the Knowledge of the Company is there any reasonable basis
therefor. There is no investigation or other proceeding pending or,
to the Knowledge of the Company, threatened, against the Company, any of its
properties (tangible or intangible) or any of its officers or directors (in
their capacity as such) by or before any Governmental Authority, nor to the
Knowledge of the Company is there any reasonable basis therefor. No
Governmental Authority has at any time challenged or questioned the legal right
of the Company to conduct its operations as presently or previously conducted or
as presently contemplated to be conducted.
3.18 Governmental
Authorization
.
Each consent, license, permit, grant or other authorization (i) pursuant to
which the Company currently operates or holds any interest in any of its
properties, or (ii) which is required for the operation of the Company’s
business as currently conducted or currently contemplated to be conducted or the
holding of any such interest (collectively, “Company Authorizations”) has
been issued or granted to the Company. The Company Authorizations are
in full force and effect and constitute all Company Authorizations required to
permit the Company to operate or conduct its business or hold any interest in
its properties or assets.
3.19 Compliance with
Laws
.
The Company has complied with, is not in violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation applicable to the Company, its business or its assets
(whether tangible or intangible).
3.20 Environmental
Compliance
. (a) The
Company has not (i) operated any underground storage tanks at any property
that the Company has at any time owned, operated, occupied or leased, or
(ii) released any amount of any substance that has been designated by any
Governmental Authority or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a “Hazardous
Material”), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present in, on or under
any property (including the land and the improvements, ground water and surface
water thereof) that the Company has at any time owned, operated, occupied or
leased.
(b) The
Company has not transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law or in a manner that would result in liability to the Company, nor has the
Company disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (any or all of the foregoing being collectively referred to
herein as “Hazardous
Materials Activities”) in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Authority to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) No
action, proceeding, revocation proceeding, amendment procedure, writ, injunction
or claim is pending, or to the Knowledge of the Company, threatened, concerning
any Environmental Permit, Hazardous Material or any Hazardous Materials Activity
of the Company. The Company has no Knowledge of any fact or
circumstance that could involve the Company in any environmental litigation or
impose upon the Company any environmental liability.
(d) The
hazardous and other materials stored by the Company (including, without
limitation, those hazardous and other materials described in Section 3.20 of the
Disclosure Schedule) have been stored and disposed of in compliance with all
applicable federal, state, local and foreign laws and regulations.
3.21 Interested Party
Transactions
.
To the Knowledge of the Company, no officer, director, consultant or shareholder
of the Company (nor any ancestor, sibling, descendant or spouse of any of such
Persons, or any trust, partnership or corporation in which any of such Persons
has or has had an interest), has or has had, directly or indirectly, (i) an
interest in any entity which furnished or sold, or furnishes or sells, services,
products or technology that the Company furnishes or sells, or proposes to
furnish or sell, or (ii) any interest in any entity that purchases from or
sells or furnishes to the Company, any goods or services, or (iii) a
beneficial interest in any Contract to which the Company is a party; provided, however, that ownership of no
more than one percent (1%) of the outstanding capital stock of a corporation
shall not be deemed to be an “interest in any entity” for purposes of this Section 3.21.
3.22 Minute
Books
.
The minutes of the Company made available to counsel for Parent are the only
minutes of the Company and contain accurate summaries of all meetings or actions
by written consent of the Board of Directors (or committees thereof) of the
Company and contain all shareholder actions by written consent and accurate
summaries of all minutes of shareholders since the time of incorporation of the
Company.
3.23 Brokers’ and Finders’
Fees
.
The Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders’ fees or agents’ commissions or any similar
charges in connection with the Agreement or any transaction contemplated
hereby.
3.24 Accounts
Receivable
.
(a) The
Company has made available to Parent a list of all accounts receivable of the
Company as of the Signing Date, together with an aging schedule indicating a
range of days elapsed since invoice.
(b) All of
the Company’s accounts receivable arose in the ordinary course of business, are
carried at values determined in accordance with GAAP consistently applied, and
are collectible except to the extent of reserves therefor set forth in the
Current Balance Sheet or, for receivables arising subsequent to the Current
Balance Sheet Date, as reflected on the books and records of the Company (which
are prepared in accordance with GAAP). No Person has any Lien on any
of the Company’s accounts receivable and no request or agreement for deduction
or discount has been made with respect to any of the Company’s accounts
receivable.
3.25 Warranties;
Indemnities
.
Except for the warranties and indemnities contained in those Contracts set forth
in Section 3.12(g)
of the Disclosure Schedule and warranties implied by law, the Company has not
given any warranties or indemnities relating to products or technology sold or
services rendered by the Company.
3.26 Financial
Projections/Operating Plan
.
The Company has made available to Parent certain financial projections with
respect to the Company’s business which projections were prepared for internal
use only. Such projections were prepared in good faith and are based
on assumptions believed by the Company to be reasonable as of the date of this
Agreement; provided,
however, that the failure to achieve any aspect of such projections
prepared in good faith shall not be deemed by it to constitute a breach of any
representation or warranty of the Company.
3.27 Banks and Brokerage
Accounts
.
Section 3.27 of the
Disclosure Schedule sets forth (a) a complete and accurate list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or a safe deposit box or
maintains a banking, custodial, trading or other similar relationship, and (b) a
complete and accurate list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company having signatory power with respect thereto.
3.28 Customers
.
Section 3.28 of
the Disclosure Schedule sets forth a true and complete list of the customers of
the Company from January 1, 2006 to the date hereof that have purchased products
or services from the Company. Since December 31, 2007, no customer of
the Company has cancelled or materially reduced or, to the Knowledge of the
Company, threatened to, cancel or materially reduce its business with the
Company.
3.29 Employment
. As
of the Signing Date, the Company employs a total of five (5) Company Employees,
who are full-time, and six (6) Company Employees, who are
part-time. Section 3.29 of the
Disclosure Schedule lists the names, current annual compensation rates and other
compensation arrangements of each of the Company Employees. The
Company has paid in full to all Company Employees, or made appropriate accruals
for on its books of account, all wages, commissions, bonuses and other direct
compensation for all services performed by them. The Company has
withheld or collected from each payment made to each of its Company Employees
the amount of all Taxes required to be withheld or collected therefrom, and the
Company has paid the same when due to the proper Governmental
Authorities. There are no pending controversies, grievances or claims
by any of the Company Employees, former Company Employees, or beneficiaries of
Company Employees or former Company Employees with respect to their employment
or benefits incident thereto, including, without limitation, sexual harassment
and discrimination claims and claims arising under workers’ compensation laws
(“Employee
Claims”). There is no union representation of the Company,
there has been no attempt by a labor organization to organize the Company
Employees into a collective bargaining unit, and, to the Knowledge of the
Company and Shareholders, there is no threat of an attempt to organize a
union. Except as set forth in Section 3.29 of the
Disclosure Schedule, since December 31, 2007, other than normal
increases in the ordinary course of business, there has not been any general
increase made or promised in the level or rate of salaries or compensation
(including, without limitation, bonuses and commissions) of any of the Company
Employees, increases made or promised in the salary or compensation (including,
without limitation, bonuses) paid to or accrued for the benefit of any Company
Employee. The Company has not engaged, contracted with or otherwise
used any independent contractors, independent sales representatives or
distributors in connection with its business. Except as set forth in
Section 3.29 of
the Disclosure Schedule, all Company Employees are employed or engaged on an
“at-will” basis and their employment or engagement can be terminated at any time
for any reason without any amounts being owed to such individual other than with
respect to wages accrued before the termination, and no Company Employee is on
disability or other leave of absence. The Company has complied with
all laws governing the employment of personnel by U.S. companies and the
employment of non-U.S. nationals in the United States, including the Immigration
and Nationality Act 8 U.S.C. Sections 1101 et seq. and its implementing
regulations. The Company has not sponsored any Company Employee for,
or otherwise engaged any Company Employee working pursuant to, a non-immigrant
visa.
3.30
Representations
Complete. None of the representations or warranties made
by the Company herein or in any Ancillary Agreement or schedule or exhibit
hereto, including the Disclosure Schedule, or in any certificate or other
document furnished by the Company pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains any untrue statement of a
material fact, or omits, to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE 4
ADDITIONAL REPRESENTATIONS
AND WARRANTIES
OF THE
SHAREHOLDERS
The
Shareholders hereby, jointly and severally, represent and warrant to Parent and
Merger Sub as follows:
4.1 Authority
.
Each Shareholder has all requisite trust power and authority and the legal
capacity, as applicable, to enter into this Agreement and any Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. Xxxxx Xxx Xxxxxx, as Trustee, has
the sole power to bind the 1950 Trust. The execution and delivery of
this Agreement and any Ancillary Agreements to which Xxxxx Xxx Ferran, Trustee
1950 Trust is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary trust action on
the part of such Shareholder and no further action is required on the part of
such Shareholder to authorize the Agreement and any Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby. This
Agreement and each of the Ancillary Agreements to which each Shareholder is a
party has been duly executed and delivered by such Shareholder and assuming the
due authorization, execution and delivery by the other parties hereto and
thereto, constitute the valid and binding obligations of such Shareholder,
enforceable against such Shareholder in accordance with their respective terms,
except as enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors’ rights or remedies in general as from time to time
in effect or (ii) the exercise by courts of equity powers.
4.2 No
Conflict
.
The execution and delivery by each Shareholder of this Agreement and any
Ancillary Agreement to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not conflict with (i) any
material Contract to which such Shareholder or any of its properties or assets
is subject, or any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to such Shareholder or its properties or
assets, (ii) in the case of Xxxxx Xxx Xxxxxx, Trustee 1950 Trust, any
provision of its trust agreement or other constitutional or
governing documents, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to such Shareholder or any of its
properties or assets.
4.3 Ownership of Company Common
Stock
.
Such Shareholder is the sole record and beneficial owner of the Company Common
Stock designated as being owned by such Shareholder opposite such Shareholder’s
name in Section 3.5(a) of the
Disclosure Schedule. Such Company Common Stock is not subject to any
Liens or to any rights of first refusal of any kind, and such Shareholder has
not granted any rights to purchase such Company Common Stock to any other person
or entity. Each Shareholder has the sole right to transfer such
Company Common Stock to Parent. Such Company Common Stock constitutes
all of the Company Common Stock owned, beneficially or of record, by such
Shareholder, and such Shareholder has no options, warrants or other rights to
acquire Company Common Stock.
4.4 Access to
Information
.
Copies of (i) the Parent’s annual report on Form 10-K filed with the SEC on
October 15, 2007 pursuant to the Securities Exchange Act of 1934 (“Parent 10-K”), (ii)
each Quarterly Report on Form 10-Q filed by Parent subsequent to the Parent
10-K, (iii) the Proxy Statement filed in connection with Parent’s Annual
Shareholders’ Meeting held in December 2007 and (iv) any reports on Form 8-K
filed by Parent subsequent to the Parent 10-K have been made available to such
Shareholder. Shareholder has had the opportunity to discuss the
plans, operations and financial condition of Parent with Parent’s
officers.
4.5 Entirely for Own
Account
.
The Parent Common Stock to be received by such Shareholder is being acquired for
investment for such Shareholder’s own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and such
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, such
Shareholder further represents that such Shareholder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Parent Common Stock.
4.6 Economic
Risk
.
Each Shareholder acknowledges that such Shareholder is able to fend for itself,
and has such Knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of an investment in the shares of
Parent Common Stock issuable pursuant to the terms of this
Agreement. Shareholder realizes that an investment in the shares of
Parent Common Stock will be a speculative investment and involves a high degree
of risk, and Shareholder is able to bear such risk without materially impairing
his financial condition.
4.7 Restricted
Securities
.
Shareholder understands and acknowledges that:
(a) The
issuance of the shares of Parent Common Stock pursuant to Section 2.6 of this
Agreement will not be registered under the Securities Act, and such shares of
Parent Common Stock must be held indefinitely until subsequently registered
under the Securities Act as contemplated herein or an exemption from such
registration is available (such as Rule 144 under the Securities
Act).
(b) The share
certificate representing the shares of Parent Common Stock issued pursuant to
Section 2.6
will be stamped with the legends specified in Section 2.6(g)
hereof.
4.8 Disposition under the
Securities Act
.
Shareholder understands that the shares of Parent Common Stock issuable pursuant
to Section 2.6
are “restricted securities” within the meaning of Rule 144 promulgated
under the Securities Act and that the exemption from registration under
Rule 144 will not be available in any event for at least six months from
the date of issuance.
4.9 Absence of Claims by the
Shareholders
.
Such Shareholder does not have any claim against the Company whether present or
future, contingent or unconditional, fixed or variable under any Contract or on
any other basis whatsoever, whether in equity or at law, except for claims for
salary and benefits and as may be provided under this Agreement or the Ancillary
Agreements.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES
OF PARENT AND MERGER
SUB
5.1 Organization, Standing and
Power
.
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a Parent Material Adverse Effect.
5.2 Authority
.
Each of Parent and Merger Sub has all requisite corporate power and authority to
enter into this Agreement and any Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub and no further
action is required on the part of Parent or Merger Sub to authorize the
Agreements or the Ancillary Agreements to which it is a party and the
transactions contemplated hereby and thereby. This Agreement and any
Ancillary Agreements to which Parent and Merger Sub are parties have been duly
executed and delivered by Parent and Merger Sub and constitute the valid and
binding obligations of Parent and Merger Sub, enforceable against each of Parent
and Merger Sub in accordance with their respective terms, except as enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
and similar laws, both state and federal, affecting the enforcement of
creditors’ rights or remedies in general as from time to time in effect or (ii)
the exercise by courts of equity powers.
5.3 No
Conflicts
.
Except as set forth in Section 5.3 of the
Parent Disclosure Schedule, the execution and delivery of this Agreement and any
Ancillary Agreement to which Parent or Merger Sub is a party do not, and the
consummation of the transactions contemplated hereby and thereby will not,
Conflict with (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or Articles of Incorporation or Bylaws of Merger Sub,
(ii) any Contract to which Parent or any of its properties or assets are
subject and which has been filed as an exhibit to the Parent 10-K and such other
filings under the Securities Act or the Exchange Act which are made subsequent
to the Parent 10-K and prior to the date hereof (all such Contracts, the “Parent Material
Contracts”), or (iii) any judgment, order or decree applicable to
Parent or Merger Sub, or (iv) any statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or their respective properties or
assets.
5.4 Consents
.
Except as set forth in Section 5.4 of the
Parent Disclosure Schedule, no consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Authority, or
any third party, including a party to any Contract with Parent (so as not to
trigger any Conflict) is required by or with respect to Parent or Merger Sub in
connection with the execution and delivery of this Agreement and any Ancillary
Agreements to which Parent or Merger Sub is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings that, if not obtained or made, would not have a Parent
Material Adverse Effect, and (iii) the filing of the Agreement of Merger or
the Certificate of Merger with the Secretaries of State of the States of
Delaware and California.
5.5 Parent Capital
Structure
(a) Parent
has a sufficient number of authorized and unissued shares of Parent Common Stock
reserved for issuance to complete the transactions contemplated by this
Agreement. The shares of Parent Common Stock issuable under any
provision of this Agreement have been duly authorized, and upon consummation of
the transactions contemplated by this Agreement, will be validly issued, fully
paid and nonassessable and will be free of any liens or encumbrances or rights
of first refusal. The shares of Parent Common Stock that will be
deposited with the Escrow Agent pursuant to Section 2.6(f) have
been duly authorized, and upon satisfaction of the conditions precedent relating
to the issuance of such shares of Parent Common Stock contemplated by this
Agreement, will be validly issued, fully paid and nonassessable and will be free
of any liens or encumbrances or rights of first refusal, except as otherwise
provided in this Agreement and the Ancillary Agreements.
(b) The
authorized capital stock of Parent consists of 50,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock. As of the date hereof,
Parent has reserved 7,603,976 shares of Parent Common Stock for issuance
pursuant to outstanding options, warrants, conversion of Parent’s Series D
Preferred Stock or other rights to acquire Parent Common Stock (the “Parent
Options”). All outstanding shares of Parent Common Stock are
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights created by statute, the Certificate of Incorporation or
Bylaws of Parent, or any agreement to which Parent is a party or by which it is
bound. All outstanding shares of Parent Common Stock and all Parent
Options have been issued or repurchased (in the case of shares that were
outstanding and repurchased by Parent) in compliance with all applicable
federal, state, foreign, or local statutes, laws, rules of regulations,
including federal and state securities laws. Parent has not, and will
not have, suffered or incurred any Liability relating to or arising out of the
issuance or repurchase of any Parent Common Stock or Parent Options, or out of
any agreements or arrangements relating thereto. There are no
declared or accrued but unpaid dividends with respect to any shares of Parent
Common Stock. Except as set forth in Section 5.5 of the
Parent Disclosure Schedule and the Parent SEC Documents, Parent has no other
capital stock authorized, issued or outstanding.
5.6 Parent SEC
Documents
.
Since January 1, 2006, Parent has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the Exchange Act or Securities Act (all of the foregoing filed since January
1, 2006 and prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to herein as the “Parent SEC
Documents”). A true and complete copy of all Parent SEC
Documents is available on the Web site maintained by the SEC at xxxx://xxx.xxx.xxx. As
of their respective filing dates, except as noted therein or to the extent
corrected by subsequently filed Parent SEC Documents, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Parent SEC Documents, and except
as noted therein or to the extent corrected by subsequently filed Parent SEC
Documents, none of the Parent SEC Documents contained on their effective dates
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
5.7 Broker’s and Finders’
Fees
.
Neither Parent nor Merger Sub has incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders’ fees or agents’ commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
5.8 Merger Sub Capital
Structure
.
Parent owns, directly or indirectly, all of the issued and outstanding shares of
capital stock or other equity ownership interests of Merger Sub, free and clear
of any Liens, and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Merger Sub is a newly-formed entity which has been formed
solely for the purposes of the Merger and will not carry on any business or
engage in any activities prior to the Effective Time other than those necessary
to consummate the Merger as contemplated hereby.
5.9 Parent Financial
Statements
. As
of their respective dates, the financial statements of Parent included in the
Parent SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC applicable with respect thereto. Such financial statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated and consistent with each other (except that
unaudited interim financial statements do not contain footnotes and other
presentation items that may be required by GAAP). Such financial
statements present fairly in all material respects Parent’s financial condition
and operating results as of the dates and during the periods indicated
therein.
5.10 No Undisclosed
Liabilities
.
Except as set forth in Section 5.10 of the
Parent Disclosure Schedule, from the date of the most recent financial
statements included in Parent SEC Documents filed prior to the date hereof
through the date hereof, Parent has no Liability that would be required to be
reflected in the liabilities column of a balance sheet prepared in accordance
with GAAP except Liabilities (i) reflected in the financial statements of
Parent included in the Parent SEC Documents filed from the date of the most
recent financial statements included in Parent SEC Documents filed prior to the
date hereof through the date hereof, or (ii) incurred in the ordinary
course of business consistent with reasonable past practices since the date of
such financial statements.
5.11 No
Changes
.
From the date of the most recent financial statements included in Parent SEC
Documents filed prior to the date hereof through the date hereof, except with
respect to the transactions contemplated hereby and as set forth in Section 5.11 of the
Parent Disclosure Schedule, (a) the business of Parent has been conducted
in the ordinary course and consistent with past practices, (b) there has
not been any employment dispute, including any claims or matters raised by any
individuals or any workers’ representative organization or union regarding labor
trouble or claim of wrongful discharge or other unlawful employment or labor
practice or action with respect to Parent, and (c) there has not been any
destruction of, damage to, or loss of any material assets or business of Parent,
or any significant customer or significant supplier (whether or not covered by
insurance), except in each case as would not be reasonably likely to have a
Parent Material Adverse Effect.
5.12 Intellectual
Property. To Parent’s Knowledge, Parent owns or possesses
sufficient legal rights to all Parent Intellectual Property, and all necessary
registration maintenance and renewal fees in connection with such Parent
Intellectual Property have been paid, except in the case where the failure to
maintain such registrations would not, in Parent’s opinion, reasonably be
expected to have a Parent Material Adverse Effect. To Parent’s
Knowledge, none of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee’s best efforts to promote the
interest of Parent or that would conflict with Parent’s
business. Neither the execution or delivery of this Agreement, nor
the carrying on of Parent’s business will, to Parent’s Knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant or instrument under which Parent is now
obligated. To Parent’s Knowledge, Parent is not aware that any of its
officers, employees or consultants (i) disclosed or may be disclosing or
utilized or may be utilizing any trade secret or proprietary information of any
third party or (ii) interfered or may be interfering in the employment
relationship with any third party and any of its present or former
employees. To the Parent's Knowledge, no third party is infringing or
has infringed upon any Intellectual Property owned by the Parent, which
infringement, in Parent's opinion, would reasonably be expected to have a Parent
Material Adverse Effect. To Parent’s Knowledge, no (i) product,
technology, service or publications of Parent, (ii) material published or
distributed by Parent, or (iii) conduct or statement of Parent constitutes
obscene material, a defamatory statement, false advertising, except to the
extent that any of the foregoing would not reasonably be expect to cause a
Parent Material Adverse Effect. As of the date of this Agreement, and
to Parent’s Knowledge, no Parent Intellectual Property is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that, in Parent’s opinion, could reasonably be expected to have a
Parent Material Adverse Effect.
5.13 Litigation
.
Except as set forth in Section 5.13 of the Parent Disclosure Schedule, (i) there
is no action, suit, claim or proceeding of any nature that would be reasonably
likely to have a Parent Material Adverse Effect that is pending, or to Parent’s
Knowledge, threatened, against Parent, its properties (tangible or intangible)
or any of its officers or directors (in their capacity as such), (ii) there is
no investigation or other proceeding that would be reasonably likely to result
in a Parent Material Adverse Effect that is pending or, to Parent’s Knowledge,
threatened, against Parent, any of its properties (tangible or intangible) or
any of its officers or directors (in their capacity as such) by or before any
Governmental Authority, nor to the Parent’s Knowledge is there any reasonable
basis therefore, and (iii) there has not been any challenge by a Governmental
Authority to the legal right of Parent to conduct its operations as presently or
previously conducted or as presently contemplated to be conducted that would be
reasonably likely to have a Parent Material Adverse Effect.
5.14 American Stock Exchange
Compliance
.
Except as set forth in Section 5.14 of the
Parent Disclosure Schedule, Parent is and at all times has been in compliance in
all material respects with all applicable corporate governance requirements set
forth in the American Stock Exchange rules that are then in effect.
5.15 Internal
Controls
.
Except as set forth in Section 5.15 of the
Parent Disclosure Schedule and in the Parent SEC Documents, Parent maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management’s
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
ARTICLE 6
CONDUCT OF THE
COMPANY
PRIOR TO THE EFFECTIVE
TIME
6.1 Conduct of Business of the
Company
(a) Except as
set forth on Schedule
6.1(a) or except to the extent that Parent shall otherwise consent in
writing, until the earlier of the Effective Time or the termination of this
Agreement pursuant to Section 10.1, the Company
shall conduct its business and operations in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, pay the debts
and Taxes of the Company when due, pay or perform its other obligations when
due, and, to the extent consistent with such business, preserve intact the
Company’s present business organizations, keep available the services of the
Company’s present officers, key employees and consultants and preserve the
Company’s relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired the Company’s goodwill and ongoing businesses at the
Effective Time.
(b) Except
(x) as set forth on Schedule 6.1(a), (y)
to the extent that Parent shall otherwise consent in writing, or (z) as
contemplated hereunder or under the Ancillary Agreements, until the earlier of
the Effective Time or the termination of this Agreement pursuant to Section 10.1, the Company
shall not:
(i) cause or
permit any amendments to its Articles of Incorporation, Bylaws or other
organizational documents of the Company;
(ii) declare,
set aside, or pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any Company Common Stock, or split,
combine or reclassify any Company Common Stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Common Stock, or repurchase, redeem or otherwise acquire,
directly or indirectly, any shares of Company Common Stock (or options, warrants
or other rights exercisable therefor);
(iii) issue,
grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any shares of capital stock of
the Company or any securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue or purchase any such shares or other
convertible securities except for issuances of Company Common Stock pursuant to
the exercise of outstanding Company Options;
(iv) grant any
severance or termination pay (whether in cash, equity or otherwise) to any
Company Employee except pursuant to Contracts outstanding, or policies existing,
on the date hereof and set forth on Schedule 6.1(b) (iv),
or adopt any new severance plan, or amend or modify or alter in any respect any
such severance plan, agreement or arrangement existing on the date hereof, or
grant any equity-based compensation;
(v) adopt or
amend any Company Employee Plan, enter into any employment contract, pay or
agree to pay any special bonus or special remuneration to any Company Employee,
or increase the salaries, wage rates, or other compensation of its Company
Employees except payments made pursuant to standard written agreements
outstanding on the date hereof and disclosed on Schedule 6.1(b)(v) or
except to the extent required by law;
(vi) except as
set forth on Schedule 6.1(b)
(vi), hire or terminate (other than for cause) any Company Employees, or
knowingly encourage any Company Employees to resign from the Company or any
Affiliate;
(vii) waive any
stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprice options granted under
any employee, consultant, director or other stock plans or authorize cash
payments in exchange for any options granted under any of such plans, except for
the acceleration of vesting pursuant to agreements with the Company in effect as
of the Signing Date;
(viii) incur any
indebtedness (other than trade payables in the ordinary course of business
consistent with past practices) or guarantee any indebtedness or issue or sell
any debt securities or guarantee any debt securities of others;
(ix) pay,
discharge or satisfy, in an amount in excess of $10,000 in any one case, or
$20,000 in the aggregate, any Liability, other than the payment, discharge or
satisfaction of Liabilities reflected or reserved against in the Current Balance
Sheet;
(x) make any
expenditures (including any capital expenditures) or enter into any commitment
or transaction exceeding $10,000 individually or $20,000 in the
aggregate;
(xi) sell,
lease, license or otherwise dispose of any of its properties or assets (whether
tangible or intangible), including without limitation the sale of any accounts
receivable of the Company, except the sale of Company’s products and services in
the ordinary course of business consistent with past practices;
(xii) revalue
any of its assets (whether tangible or intangible), including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business and consistent with GAAP;
(xiii) make or
change any election in respect of Taxes, adopt or change any accounting method
or practices (other than as required by GAAP), settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(xiv) waive or
release any right or claim of the Company;
(xv) commence,
threaten or settle any litigation;
(xvi) (A) sell,
license or transfer to any Person any rights to any Company Intellectual
Property or enter into any agreement with respect to any Company Intellectual
Property with any Person or entity, (B) buy or license any Intellectual
Property or enter into any agreement with respect to the Intellectual Property
of any Person or entity, (C) enter into any agreement with respect to the
development of any Intellectual Property with a third party, or (D) change
pricing or royalties charged by the Company to its customers or licensees, or
the pricing or royalties set or charged by Persons who have licensed
Intellectual Property to the Company;
(xvii) acquire
or agree to acquire by merging or consolidating with, or by purchasing any
assets or equity securities of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the Company’s business;
(xviii) enter
into, renew, fail to renew, renegotiate, amend or otherwise modify, or
materially breach the terms of any Material Contract;
(xix) terminate,
amend or fail to renew any Insurance Policy;
(xx) terminate
or fail to review or preserve any Company Authorization; or
(xxi) take, or
agree in writing or otherwise to take, any of the actions described in Section 6.1(b)(i) through
Section 6.1(b)(xx)
hereof, or any other action that would prevent the Company or any of the
Shareholders from performing, or cause the Company or any of the Shareholders
not to perform, their respective covenants hereunder.
6.2 No
Solicitation
.
Until the earlier of the Effective Time or the termination of this Agreement
pursuant to Section
10.1, neither the Company nor the Shareholders shall (nor shall the
Company or Shareholders permit, as applicable, any of their respective officers,
directors, employees, shareholders, agents, representatives or affiliates to),
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, knowingly encourage, initiate
or participate in any inquiry, negotiations or discussions with respect to any
offer or proposal to purchase or otherwise acquire all or any part of the
Company’s business, properties or technologies, or all or any amount of the
Company Common Stock (whether or not outstanding), whether by merger, purchase
of assets, tender offer, license or otherwise, (b) disclose any information
not customarily disclosed to any Person concerning the Company’s business,
properties or technologies, or afford to any Person access to its properties,
technologies, books or records not customarily afforded such access,
(c) assist or cooperate with any Person to make any proposal to purchase or
otherwise acquire all or any part of the Company’s business, properties or
technologies or all or any amount of the Company Common Stock other than sales
to customers in ordinary course, or (d) enter into any Contract with any
Person providing for any of the foregoing. In the event that the
Company, any Shareholder, or any of the Company’s affiliates shall receive any
offer, proposal, or request, directly or indirectly, of the type referenced in
clauses (a), (c), or (d) above, or any request for disclosure or access as
referenced in clause (b) above, the Company or such Shareholder, as
applicable, shall immediately (x) suspend any discussions with such offeror
or party with regard to such offers, proposals, or requests and (y) notify
Parent thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Parent may reasonably request. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this Section 6.2 were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Parent
shall be entitled to an immediate injunction or injunctions, without the
necessity of proving the inadequacy of money damages as a remedy and without the
necessity of posting any bond or other security, to prevent breaches of the
provisions of this Section 6.2 and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which Parent may be entitled at law or in equity.
ARTICLE 7
ADDITIONAL
AGREEMENTS
7.1 Shareholder Securities Law
Compliance and Approval
(a) Parent
shall issue the shares of Parent Common Stock to be issued to the Shareholders
pursuant to this Agreement pursuant to an exemption or exemptions from
registration under Regulation D promulgated under the Securities Act and an
exemption from qualification under the laws of the State of California and other
applicable state securities laws. It is acknowledged and understood
that Parent is relying on written representations made by each Shareholder
pursuant to this Agreement, and by each Shareholder pursuant to the Lock-Up
Agreement.
(b) As soon
as practicable following the execution of this Agreement, Company will take all
action necessary in accordance with the CGCL and its Articles of Incorporation
and Bylaws to convene a special meeting of the Shareholders to be held as
promptly as practicable for the purpose of obtaining, or obtain by written
consent, the Requisite Shareholder Approval.
(c) Notice of Shareholder
Consent. As promptly as practicable following the execution of
this Agreement, the Company shall give written notice of this Agreement, the
proposed Merger and the Requisite Shareholder Approval to all Shareholders
pursuant to the requirements of Section 603 and Chapter 13 of the
CGCL. The materials submitted to the Shareholders in respect of this
Agreement, the proposed Merger and the Requisite Shareholder Approval shall
comply in all respects with the applicable provisions of the CGCL and shall have
been subject to prior review and comment by Parent.
7.2 Governmental Approvals;
Contract Consents
.
Subject to the terms and conditions set forth in this Agreement, each of the
parties hereto shall take promptly, or cause to be taken promptly, all actions,
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to satisfy the conditions set
forth in Article 8
and to remove any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties hereto
the benefits contemplated by this Agreement.
(a) Each of
the Company and Parent shall promptly execute and file, or join in the execution
and filing of, any application, notification or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Authority, whether federal, state, local or foreign, which may be
reasonably required, or which Parent may reasonably request, in connection with
the consummation of the Merger and the other transactions contemplated
hereby. Each of the Company and Parent shall use commercially
reasonable efforts to obtain all such authorizations, approvals and
consents. Each of the Company and Parent shall promptly inform the
other of any material communication between the Company and Parent (as
applicable) and any Governmental Authority regarding the Merger or any other
transactions contemplated hereby. If the Company or Parent or any
Affiliate thereof shall receive any formal or informal request for supplemental
information or documentary material from any Governmental Authority with respect
to the Merger or any other transactions contemplated hereby, then the Company or
Parent (as applicable) shall make, or cause to be made, as soon as reasonably
practicable, a response in compliance with such request. Each of the
Company and Parent shall direct, in its sole discretion, the making of such
response, but shall consider in good faith the views of the other.
(b) The
Company shall obtain all necessary consents, waivers and approvals of any
parties to any Contract as are required thereunder in connection with the Merger
or for any such Contracts to remain in full force and effect so as to preserve
all rights of, and benefits to, the Surviving Corporation under such Contract
from and after the Effective Time.
7.3 Notification of Certain
Matters
.
The Company or any Shareholder, as the case may be, shall give prompt notice to
Parent of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which has caused or is likely to cause any
representation or warranty of the Company or any Shareholder, respectively and
as the case may be, set forth in this Agreement to be untrue or inaccurate at or
at any time prior to the Effective Time, and (ii) any failure of the
Company or any Shareholder, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
7.4 Access to
Information
.
The Company shall afford Parent and its accountants, counsel and other
representatives, reasonable access during the period commencing on the date
hereof and continuing through the earlier of the Effective Time or the
termination of this Agreement, to (a) the Company’s properties, books,
contracts, commitments and records, (b) other information concerning the
business, properties and personnel (subject to restrictions imposed by
applicable law) of the Company as Parent may reasonably request, and
(c) employees, officers, directors, customers, suppliers and creditors of
the Company as may be reasonably necessary or appropriate for the purpose of
enabling Parent to familiarize itself with the business of the
Company. The Company shall afford Parent and its accountants, counsel
and other representatives copies of internal financial statements (including Tax
Returns and supporting documentation) and any other documentation reasonably
requested by Parent, promptly upon request.
7.5 Confidentiality
.
Each of the parties hereto hereby agrees that the information obtained in any
investigation pursuant to Section 7.4 hereof, or in
connection with the negotiation and execution of this Agreement or the
effectuation of the Merger and the other transactions contemplated hereby, shall
be governed by the terms of the Confidential Disclosure Agreement, dated as of
August 1, 2006 (the “Confidential Disclosure
Agreement”) between the Company and Parent.
7.6 Public
Disclosure
.
No party shall issue or make any statement or other communication or disclosure
to any third party (other than their respective agents or employees of the
Company) regarding this Agreement, the Merger or the other transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefor, without the consent of the other party hereto, subject
to Parent’s obligation to comply with applicable laws and the rules and
regulations of the American Stock Exchange and the SEC and the Company’s
obligation to comply with applicable laws. The parties agree to
prepare and issue a mutually acceptable press release announcing this Agreement
promptly after it is executed.
7.7 Employment or Consulting
Arrangements
.
Parent agrees that the employees of the Company immediately prior to the
Effective Time shall become employees or consultants of the Surviving
Corporation or Parent upon the Effective Time; provided, however, that this
Section 7.7
shall not be construed to limit the ability of the Surviving Corporation, Parent
or the Company to terminate the employment or consultant engagement of any
Company Employee at any time. If requested by the Parent in its sole
discretion, each employee designated by Parent shall agree to accept offers of
at-will employment or at-will consulting engagement, which acceptances shall
contain customary confidentiality, non-competition, non-solicitation, invention
assignment provisions and other usual and customary terms, and shall also
contain a release of claims against the Company, the Shareholders, their
respective Affiliates and their successors and assigns, in form and substance
satisfactory to the Shareholders, with respect to all matters related to their
employment or consultant engagement by the Company prior to the Closing (“Employment or Consulting
Acceptances”).
7.8 Employee Benefit
Plans
.
With respect to each benefit plan, program, practice, policy or arrangement
maintained by Parent or a subsidiary of Parent in which Company Employees
subsequently participate (the “Parent Plans”), for
purposes of determining eligibility and vesting, service with the Company (or
predecessor employers to the extent the Company provides past service credit
under applicable Company Employee Plans) shall be treated as service with
Parent; provided, that
such service shall not be recognized to the extent that such recognition would
result in a duplication of benefits or to the extent that such service was not
recognized under the applicable Company Employee Plan. Parent shall use
reasonable efforts to cause to be waived any waiting periods, evidence of
insurability requirements, or the application of any pre-existing condition
limitations under any Parent Plans. Parent shall use commercially
reasonable efforts to give employees of the Company credit for amounts paid
under a similar Company Employee Plan during the plan year that includes the
Effective Time for purposes of applying deductibles, co-payments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the Parent Plan for the plan year in which the
Effective Time occurs.
7.9 Ancillary
Agreements
.
Promptly after the execution and delivery of this Agreement and prior to the
Effective Time, the Company and Parent shall cause the following agreements to
be executed and delivered by the respective parties thereto:
(a) Lock-Up
Agreement. Each of the
Shareholders shall enter into the Lock-Up Agreement with Parent, effective as of
the Effective Time (the “Lock-Up Agreement”)
in substantially the form of Exhibit B attached hereto,
providing, among other things, that such Shareholders shall not transfer their
shares of Parent Common Stock following the Effective Time except as provided
therein and including a representation as to such person’s intentions with
respect thereto.
(b) Consulting Agreement. Xxxxxx Xxxxx
shall enter into consulting agreement with Parent or the Surviving Corporation,
effective as of the Effective Time, in form and substance satisfactory to each
such person and Parent (the “Consulting
Agreement”), which Consulting Agreement shall contain customary
confidentiality, non-competition, non-solicitation, invention assignment
provisions and other usual and customary terms, in substantially the form of
Exhibit_C
attached hereto.
(c) Assignment and Assumption
Agreement. The Company and
the Shareholders shall enter into an Assignment and Assumption
Agreement, to be effective immediately prior to the Effective Time, in
substantially the form of Exhibit D attached
hereto (the “Assignment and Assumption
Agreement”), providing for, among other things, the Company’s assignment
to the Shareholders, and the Shareholders’ assumption, on a joint and several
basis, of, certain liabilities as described in such Assignment and Assumption
Agreement, including without limitation, liabilities of the Company to any
Governmental Authority or any Company Employee in respect of Taxes, Employee
Claims, payroll, labor and all other Company Employee or Company personnel
related matters for the period from the beginning of time and ending immediately
prior to the Effective Time, other than payments for which Parent is responsible
under Section 7.16 herein (the “Excluded
Liabilities”).
(d) Board Observer Rights
Agreement. Parent and the Shareholders shall enter into a
Board Observer Rights Agreement, to be effective as of the Effective Time, in
substantially the form of Exhibit E attached
hereto (the “Board
Observer Rights Agreement”), providing for, among other things, the right
of one representative of the Shareholders to attend Parent board of directors’
meetings as an observer.
(e) Ferran Scientific
Agreement. Ferran Scientific, Inc. (“FS”) and the Merger
Sub or Parent shall enter into an agreement in form and substance satisfactory
to FS and Parent (the “FS Agreement”), in
substantially the form of Exhibit F attached
hereto, providing for, among other things, the agreement by FS to (i) the
Company’s assignment of the following agreements to the Surviving
Corporation: Master Alliance Agreement effective January 2, 2007
between FS and the Company, including the accompanying Fixed Asset Lease
Agreement, Exclusive Sub-License Agreement and Sublease, as amended, attached
thereto as Exhibits A, B and C, respectively, thereto; (ii) the deferral of the
payment of the $50,000 administrative fee to FS until no later than the earlier
of twelve (12) months from the Closing Date or the closing of the sale of Core
Systems Inc. by Parent (provided, however, that the Chief Executive Officer of
Parent may but shall not be required to, in his sole discretion, pay such
$50,000 administrative fee prior to such deferred due date); (iii) use
reasonable efforts to forward to the Surviving Corporation any future,
non-confidential communications between FS and Horiba/XXXX that pertain to the
technology licensed under the Exclusive Sub-License Agreement between FS and the
Company effective as of January 2, 2007; and (iv) sell to Parent at cost certain
product inventory identified on Exhibit I attached
hereto and to defer the payment for the purchase of such inventory until no
later than the earlier of twelve (12) months from the Closing Date or the
closing of the sale of Core Systems, Inc. by Parent (provided, however, that the
Chief Executive Officer of Parent may but shall not be required to, in his sole
discretion, pay the purchase price of such inventory prior to such due
date).
(f) X. Xxxxxx Employment Agreement. X. Xxxxxx shall
enter into an employment agreement with Parent or the Surviving Corporation,
effective as of the Effective Time, in form and substance satisfactory to him
and Parent (the “X.
Xxxxxx Employment Agreement”), which X. Xxxxxx Employment Agreement shall
contain customary confidentiality, non-competition, non-solicitation, invention
assignment provisions and other usual and customary terms, in substantially the
form of Exhibit_G attached
hereto.
(g) Boumsellek
Employment
Agreement. Said Boumsellek
shall enter into an employment agreement with Parent or the Surviving
Corporation, effective as of the Effective Time, in form and substance
satisfactory to him and Parent (the “Boumsellek Employment
Agreement”), which Boumsellek Employment Agreement shall contain
customary confidentiality, non-competition, non-solicitation, invention
assignment provisions and other usual and customary terms, in substantially the
form of Exhibit_H attached
hereto.
7.10 Expenses
.
Whether or not the Merger is consummated, all fees and expenses incurred in
connection with the Merger including, without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses.
7.11 American Stock
Exchange
.
Parent shall file any documentation required to obtain the approval of the
American Stock Exchange for issuance and listing of the Merger Shares within ten
business days of the Signing Date, and use its best efforts to effectuate the
issuance and listing of the Merger Shares at the Closing or the earliest
practicable time thereafter. Parent agrees to use best efforts to
maintain the listing of the Parent Common Stock on the American Stock Exchange
and will take all action necessary to comply in all respects with Parent’s
reporting, filing and other obligations under the bylaws or rules of the
American Stock Exchange. Parent further agrees, if it applies to have
the Parent Common Stock traded on any other stock trading market or exchange, it
will include in such application all of the Merger Shares, and will take such
other action as is necessary to cause all of the Merger Shares to be listed on
such other trading market or exchange as promptly as possible.
7.12 Shareholders’ Approval of
Merger. The Shareholders agree to vote or consent in writing,
in their capacities as shareholders of the Company, for the approval of the
Merger.
7.13 Department of Homeland
Security. The Shareholders agree to continue to
cooperate with Parent and to take such action as shall be requested by Parent to
effectuate the substitution of Parent for the Company under the agreements
between the Company and the Department of Homeland Security after the
Closing.
7.14 Bank
Accounts. The Shareholders agree to deliver evidence,
satisfactory in form and substance to Parent, of written notification to all
banks at which the Company maintains bank accounts revoking the authority of all
signatures to act on behalf of the Company within five (5) business days after
the Closing Date.
7.15 Participation. So
long as the Shareholders shall be subject to the Lock-Up Agreement
and in the event Parent shall conduct a registered underwritten public offering
of shares of its Common Stock (a “Public Offering”),
Parent shall use its best efforts to allow the Shareholders inclusion in the
Public Offering such that the Shareholders may sell a pro-rata portion of their
Merger Shares (based on each Shareholder’s percentage ownership in the Parent on
the basis of all of the Company’s issued and outstanding shares of Common Stock
plus the number of shares of Common Stock of the Public Offering) in the Public
Offering, to the fullest extent permitted by the underwriters of such Public
Offering, and Parent shall include such Merger Shares of the Shareholders in any
registration statement relating to the Public Offering. If the
underwriters do not, in their sole and absolute discretion, allow the Merger
Shares of Shareholders to be so included in such Public Offering, the
Shareholders shall have no rights to stop or interfere with such Public
Offering.
7.16 Payroll. Parent
shall be responsible for compensation, benefits and unused vacation days due
Company Employees for the period from March 23, 2008 until the Closing
Date.
ARTICLE 8
CONDITIONS TO THE
MERGER
8.1 Conditions to Obligations of
Each Party
.
The respective obligations of the Company and the Shareholders and of Parent and
Merger Sub to effect the Merger shall be subject to the satisfaction, at or
prior to the Effective Time, of the following conditions:
(a) No
Orders. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting the consummation of the Merger or any other transaction
contemplated hereby.
(b) No
Injunctions. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other similar legal restraint shall be in effect that has the
effect of prohibiting the consummation of the Merger or any other transaction
contemplated hereby.
(c) Governmental
Approvals. Parent and the Company shall have obtained all
consents and approvals from any Governmental Authority necessary to consummate
the Merger and the other transactions contemplated hereby.
(d) Requisite Shareholder
Approval. The Company shall have obtained the Requisite
Shareholder Approval and such Requisite Shareholder Approval shall not have been
rescinded, revoked or otherwise repudiated.
(e) Legal
Proceedings. No Governmental Authority shall have commenced,
or notified either Parent or the Company or any of their respective
representatives that such Governmental Authority intends to commence,
proceedings to restrain, prohibit, condition, rescind or take any substantially
similar action with respect to any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements, unless such Governmental Authority
shall have withdrawn such notice and abandoned all such
proceedings.
(f) Third Party
Consents. Parent and the Company shall have obtained the third
party consents that are necessary to consummate the Merger and the other
transactions contemplated hereby and in the Ancillary Agreements and that are
listed on Schedule
8.1(f).
8.2 Conditions to the
Obligations of Parent and Merger Sub
.
In addition to the conditions set forth in Section 8.1, the
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent and Merger Sub:
(a) Covenants. The
Company and the Shareholders shall have performed and complied in all material
respects with all material covenants and obligations under this Agreement
required to be performed and complied with by such parties as of the
Closing.
(b) No Company Material Adverse
Effect. Since the date of this Agreement, there shall have
been no change having a Company Material Adverse Effect prior to the
Closing. For purposes of this Section 8.2(b), none
of the following (individually or in combination) shall be deemed to constitute,
or shall be taken into account in determining whether there has been a change
resulting in a Company Material Adverse Effect: (i) any adverse
effect to the extent resulting from general business or economic conditions;
(ii) any adverse effect to the extent resulting from conditions generally
affecting any industry or industry sector in which the Company operates or
competes; (iii) any adverse effect to the extent resulting from the
announcement, execution or delivery of this Agreement or the pendency or
consummation of the Merger; (iv) any adverse effect to the extent resulting from
any change in accounting requirements or principles or any change in applicable
laws, rules or regulations or the interpretation thereof; (v) any adverse effect
to the extent resulting from (1) any action taken by the Company at Parent’s
direction, (2) any action referred to in Section 6.1 taken by the
Company with Parent’s written consent, (3) the failure to take any action
referred to in Section 6.1 that was not
taken by the Company because Parent unreasonably withheld or delayed its
consent, or (4) the payment of any amounts due to, or the provision of any
other benefits to, any Persons or entities pursuant to the Company’s obligations
under Contracts in existence as of the date of this Agreement and disclosed in
the Disclosure Schedule; or (vi) any adverse effect resulting from any
breach by Parent of any provision of this Agreement.
(c) Certificate of the
Company. Parent shall have received a certificate of the
Company, executed by the President of the Company, certifying as to the matters
set forth in Section 8.2(a) and Section 8.2(b) hereof,
which certificate will include a reaffirmation of the representations and
warranties of the Company set forth in this Agreement as of the Effective
Time.
(d) Certificate of the
Shareholders. Parent shall have received a certificate of each
of the Shareholders certifying as to the matters set forth in Section 8.2(a) and Section 8.2(b) hereof,
which certificate will include a reaffirmation of the representations and
warranties of the Shareholders set forth in this Agreement as of the Effective
Time.
(e) Good Standing
Certificates. Parent shall have received a good standing
certificate with respect to the Company issued by the Secretary of State of the
State of California and a tax good standing certificate with respect to the
Company issued by the California Franchise Tax Board, each dated within a
reasonable period prior to the Closing.
(f) Satisfactory Completion of
Due Diligence Review. Parent and Merger Sub shall have
satisfactorily completed their due diligence review of the Company, as
determined by Parent and Merger Sub in their sole discretion.
(g) Legal
Matters. The form and substance of all legal matters
contemplated hereby and of all papers delivered hereunder shall be reasonably
acceptable to counsel for Parent.
(h) Ancillary
Agreements. Each Ancillary Agreement shall be in full force
and effect and none of the parties thereto (other than Parent or Merger Sub and,
in the case of the Escrow Agreement, the Escrow Agent) shall have taken any
action to rescind, revoke or otherwise repudiate such party’s Ancillary
Agreement(s).
(i) Authorization. All
actions necessary to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Company and the consummation of
the Merger and the other transactions contemplated hereby and thereby shall have
been duly and validly taken by unanimous approval of the Board of Directors of
the Company, and the Company shall have full power and right to effect the
Merger on the terms provided herein.
(j) Company Shareholder
Approval. The Company shall have obtained the approval of the
Merger and related transactions by all Shareholders and such approval shall not
have been rescinded, revoked or otherwise repudiated, and no Shareholders shall
have exercised, or shall have any continued right to exercise, appraisal,
dissenter’s or similar rights of appraisal under the CGCL.
(k) Resignation of Officers and
Directors. The officers and directors of the Company
immediately prior to the Effective Time shall have resigned as officers and
directors of the Company effective as of the Effective Time.
(l) Horiba/XXXX
Acknowledgement. Horiba XXXX Co., Ltd. (“Horiba/XXXX”) shall
not have revoked its consent letter to the Company dated February 26,
2008.
(m) Releases. The
Company shall have obtained and delivered to Parent releases, in form and
substance satisfactory to Parent, duly executed by the Shareholders and all
officers and directors of the Company.
(n) Spousal
Consents. The
Company shall have obtained and delivered to Parent written consents, in form
and substance satisfactory to Parent, duly executed by the spouses of all
individual Shareholders who are residents of State of California are who are
married, whereby such spouses acknowledge and consent to the transactions
contemplated by this Agreement and the Ancillary Agreements.
(o) Termination of
Said Boumsellek’s Current Employment Agreement and Waiver. The
Amended and Restated Employment Agreement dated January 15, 2008 by and between
the Company and Said Boumsellek shall have been terminated, and the Company
shall have delivered to Parent evidence of such termination and written waiver
by Said Boumsellek of all his rights thereunder, in form and substance
satisfactory to Parent.
(p) Extension of Certain
Promissory Notes. The Company shall have obtained and
delivered to Parent amendments to the Demand Promissory Note of the Company
dated January 14, 2008 in the principal amount of $100,000 in favor
of Xxxxxx Xxxxxx and the Demand Promissory Note of the Company dated November 1,
2004 in the principal amount of $83,000 in favor of FS duly executed
by the Company and such holders extending the maturity dates for the payment of
principal and interest thereunder to no later than the earlier of twelve (12)
months from the Closing Date or the closing of the sale of Core
Systems Inc. by Parent (provided, however, that the Chief Executive Officer of
Parent may but shall not be required to, in his sole discretion, pay the amounts
due under such promissory notes prior to such deferred maturity
dates).
(q) Payments Owed Company
Employees. The Company shall have obtained and delivered to
Parent evidence that the Shareholders shall have paid and obtained waivers of
all obligations of the Company owing to the Company Employees for compensation,
benefits and unused vacation days as of March 23, 2008, in form and substance
satisfactory to Parent.
(r) Real Estate
Leases. The Company shall have delivered to Parent (i) a valid
and effective lease or sublease in respect of Suites 1 and 2 located at the
premises commonly identified as 00000 Xxxxxxxx Xxxxxx Xxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000 (the “Premises”), pursuant
to which the Company will be the tenant or subtenant, in form and
substance satisfactory to Parent, (ii) a valid and effective sublease by the
Company in respect of a portion of Suite 13 located at the Premises
to FS or an Affiliate of FS, in form and substance satisfactory to the Parent,
and (iii) written consent of landlord for the leases and subleases referred to
in clauses (i) and (ii) above and for the Merger of the Company into Merger Sub,
in form and substance satisfactory to Parent.
(s) Waiver of Indemnification
Rights. Each of Xxxxxx Xxxxxx, Xxxxx Xxxxxx, Said Boumsellek
and Xxxxxx Xxxxx shall have duly executed waivers of all their rights to or
claims for indemnification from the Company, whether pursuant to contract, the
certificate of incorporation or by-laws of the Company or by law, with respect
to matters arising prior to the Closing Date, in form and substance satisfactory
to Parent.
(t) Cancellation of Insurance
Policies. The Company shall have delivered evidence,
satisfactory in form and substance to Parent, of cancellation of all insurance
policies in respect of the Company effective as of the Effective Time (provided
that Parent shall also deliver to the Company copies of insurance binders for
the replacement insurance policies effective as of the Effective
Time).
(u) Credit
Cards. The Company shall have surrendered to Parent all
company credit cards whether issued in the name of the Company, any
Shareholder or any officer or director of the Company.
8.3 Conditions to Obligations of
the Company and
the Shareholders
.
In addition to the conditions set forth in Section 8.1, the
obligations of the Company and each of the Shareholders to consummate the Merger
and the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of the following condition, which
may be waived, in writing, exclusively by the Company and the
Shareholders:
(a) No Parent Material Adverse
Effect. Since the date of this Agreement, there shall been no
change having a Parent Material Adverse Effect prior to Closing. For
purposes of this Section 8.3(a), none of the following (individually or in
combination) shall be deemed to constitute, or shall be taken into account in
determining whether there has been a change resulting in a Parent Material
Adverse Effect: (i) any adverse effect to the extent resulting from
general business or economic conditions; (ii) any adverse effect to the extent
resulting from conditions generally affecting any industry or industry sector in
which Parent operates or competes; (iii) any adverse effect to the extent
resulting from the announcement, execution or delivery of this Agreement or the
pendency or consummation of the Merger; (iv) any adverse effect to the extent
resulting from any change in accounting requirements or principles or any change
in applicable laws, rules or regulations or the interpretation thereof; (v) any
adverse effect to the extent resulting directly from (1) any action taken
by Parent with the Company’s prior written consent, or (2) the payment of
any amounts due to, or the provision of any other benefits to, any persons or
entities pursuant to Parent’s obligations under Contracts in existence as of the
date of this Agreement; (vi) any adverse effect resulting from any breach
by the Company or the Shareholders of any provision of this Agreement; or (v)
any fluctuation in the market price of the Parent Common Stock.
(b) Covenants. Each
of Parent and Merger Sub shall have performed and complied in all material
respects with all material covenants and obligations under this Agreement
required to be performed and complied with by it as of the Closing.
(c) Certificate of
Parent. The Company and the Shareholders shall have received a
certificate of Parent, executed by a duly authorized officer of Parent,
certifying as to the matters set forth in Section 8.3(a) and Section 8.3(b) hereof,
which certificate will include a reaffirmation of the representations and
warranties of the Parent set forth in this Agreement as of the Effective
Time.
(d) Satisfactory Completion of
Due Diligence Review. The Company and Shareholders shall have
satisfactorily completed their due diligence review of Parent, as determined by
the Company and the Shareholders in their sole discretion.
(e) Legal
Matters. The form and substance of all legal matters
contemplated hereby and of all papers delivered hereunder shall be reasonably
acceptable to counsel for the Company.
(f) Ancillary
Agreements. Each Ancillary Agreement shall be in full force
and effect and none of the parties thereto (other than the Company or the
Shareholders and, in the case of the Escrow Agreement, the Escrow Agent) shall
have taken any action to rescind, revoke or otherwise repudiate such party’s
Ancillary Agreement(s).
(g) Authorization. All
actions necessary to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Parent and the consummation of the
Merger and the other transactions contemplated hereby and thereby shall have
been duly and validly taken by the Board of Directors of the Parent, and the
Parent shall have full power and right to effect the Merger on the terms
provided herein.
(h) Discharge of the Xxxxx Fargo
Bank Credit Line. Parent or Merger Sub shall have paid and
discharged in full, at Closing, the obligations of the Company owing under the
Xxxxx Fargo Bank credit line described in the Disclosure Schedule.
(i) Closing
Adjustment. At Closing, Parent or Merger Sub shall have paid
the Company the sum of $13,536.72.
ARTICLE 9
SURVIVAL AND
INDEMNIFICATION
9.1 Survival of Representations,
Warranties and Covenants
.
The representations, warranties, covenants and obligations of the Company and
the Shareholders and of Parent and Merger Sub set forth in this
Agreement, any certificate or other instrument delivered pursuant hereto, or any
Ancillary Agreement, shall survive for a period of twelve (12) months following
the Closing Date; provided,
however, that (i) representations and warranties contained in Section 3.10 (Taxes)
and Section
3.29 (Employment) shall survive and remain in full force and effect until
the expiration of the applicable statutes of limitations, (ii) any such
covenants and obligations of Shareholders, Parent or Merger Sub that pursuant to
their terms continue beyond such 12 month period shall survive the Closing in
accordance with their terms, (iii) there shall be no limitation on time during
which indemnification may be asserted, sought or obtained for any instance of
fraud on the part of the Company, any Shareholder or Parent of any provision of
this Agreement, any Ancillary Agreement or any other document delivered
hereunder or thereunder, (iv) the covenants and obligations of the
parties contained in Sections 7.5 and 7.13 shall survive the Closing Date
without limitation, and (v) the covenants and obligations of the parties
contained in Section 7.15 shall survive the Closing Date until the Shareholders
shall no longer be subject to the Lock-Up Agreement. If a Notice of
Claim has been delivered in compliance with this Article 9
prior to the expiration of the applicable indemnification period as provided
above (each, the “Applicable Indemnification
Period”), then such representations, warranties, covenants and
obligations, as the case may be, shall survive as to such claim until the claim
has been finally resolved. For the avoidance of doubt, the parties
hereby acknowledge and agree that the Applicable Indemnification Period for
fraud shall be indefinite.
9.2 Indemnification
(a) Parent
and its Affiliates, including the Surviving Corporation, and their respective
officers, directors, employees, agents, successors and assigns (each, a “Parent Indemnified
Party”
and collectively, the “Parent Indemnified
Parties”), shall, subject to Section 9.3, be held
harmless by the Shareholders against all Losses incurred or sustained by the
Parent Indemnified Parties, or any of them, directly or indirectly, as a result
of, arising out of or relating to (i) any breach of a representation or
warranty of the Company or the Shareholders set forth in this Agreement or in
any certificate or instrument delivered in connection herewith or in any
Ancillary Agreement, or (ii) any failure by the Company or the Shareholders
to perform or comply with any covenant applicable to it contained in this
Agreement or in any Ancillary Agreement. There shall not exist any
right of contribution from the Surviving Corporation or Parent with respect to
any Loss for which indemnity may be claimed hereunder.
(b) Each
Shareholder and each Shareholder’s Affiliates, officers, directors, employees,
agents, successors and assigns, as applicable (each, a “Company Indemnified
Party” and collectively, the “Company Indemnified
Parties”), shall, subject to Section 9.3, be held
harmless by Parent against all Losses incurred or sustained by the Company
Indemnified Parties, or any of them, directly or indirectly, as a result of or
arising out of (i) any breach of a representation or warranty of the Parent or
Merger Sub set forth in this Agreement or in any certificate or instrument
delivered in connection herewith or in any Ancillary Agreement or (ii) any
failure by Parent or Merger Sub to perform or comply with any covenant
applicable to it contained in this Agreement or in any Ancillary
Agreement.
9.3 Limitations on
Indemnification
(a) Notwithstanding
Section 9.2, no
Parent Indemnified Party or Company Indemnified Party may recover pursuant to
the indemnity set forth in Section 9.2 unless
and until Losses in excess of $25,000 in the aggregate (the “Basket Amount”) has
or have been incurred, after which case such Person shall be entitled to recover
pursuant to the indemnity set forth in Section 9.2 all such
Losses, including the Basket Amount.
(b) Except as
provided in Section
9.3(d) and Section 9.3(e),
claims for indemnification against the Escrow Fund shall be the sole and
exclusive remedy for the Parent Indemnified Parties with respect to claims
resulting from or relating to any of the matters set forth in Section
9.2(a).
(c) Except as
provided in Section
9.3(d) and Section 9.3(e), the
maximum aggregate amount that all Company Indemnified Parties shall be eligible
to recover pursuant to the indemnity set forth in Section 9.2(b) shall
be equal to the product of (i) the number of Escrow Shares and (ii) the average
of the closing sale prices of one share of Parent Common Stock as reported on
the American Stock Exchange for the ten (10) consecutive trading days
immediately prior to the Closing Date (the “Average
Price”).
(d) Nothing
in this Agreement shall limit the liability of any Person in respect of any
fraud committed by such Person. Notwithstanding any provisions to the
contrary, the limitations set forth in this Section 9.3 shall not
apply to any claim against the Escrow Fund, the Shareholders or Parent based on
fraud.
(e) The
maximum aggregate liability of the Shareholders, and the sole remedy of the
Parent Indemnified Parties with respect to the indemnity set forth in Section 9.2(a) for
breach of any representations and warranties in Section 3.10 (Taxes)
and/or Section
3.29 (Employment), shall be the recovery by the Parent Indemnified
Parties of the Merger Shares (valued at the Average Price) held by the
Shareholders and, to the extent the Merger Shares have been sold by
the Shareholders as permitted by the Lock-Up Agreement, the amount in cash equal
to the product of the number of Merger Shares so sold and the Average
Price.
9.4 Notice of
Claim
(a) As used
herein, the term “Claim” shall mean a
claim for indemnification under this Article 9,
“Indemnified
Party” shall mean any Parent Indemnified Party or Company Indemnified
Party making a claim for indemnification pursuant to Sections 9.2(a) and
9.2(b)
respectively, and “Indemnifying Party”
shall mean the Shareholders, in the case of a claim brought pursuant to Section 9.2(a),
or Parent, in the case of a claim brought pursuant to Section 9.2(b). Subject
to the terms of this Agreement, the Indemnified Party shall give written notice
of a Claim (a “Notice
of Claim”) to the Indemnifying Party (with a copy to the Escrow Agent and
the Shareholder Representative) promptly after such Indemnified Party becomes
aware of the existence of any potential claim by such Indemnified Party for
indemnification from the Indemnifying Party under this Article 9.
(b) Each
Notice of Claim by an Indemnified Party given pursuant to Section 9.4(a)
shall contain the following information: (i) that such Indemnified Party has
directly or indirectly incurred, paid or properly accrued, or sustained or, in
good faith, believes it is reasonably likely that it shall have to directly or
indirectly incur or sustain, Losses in an aggregate stated amount arising from
such Claim (which amount may be the amount of damages claimed by a third party
in an action brought against such Indemnified Party based on alleged facts,
which if true, would give rise to liability for Losses indemnifiable to such
Indemnified Party under this Article 9); and
(ii) a brief description, in reasonable detail (to the extent reasonably
available to such Indemnified Party), of the facts, circumstances or events
giving rise to the alleged Losses based on such Indemnified Party’s good faith
belief thereof, including the identity and address of any third-party claimant
(to the extent reasonably available to such Indemnified Party) and copies of any
formal demand or complaint, the amount of Losses, the date each such item was
incurred, paid or properly accrued, or sustained, or the basis for such
anticipated liability, and the specific nature of the breach to which such item
is related.
(c) An
Indemnified Party may submit a Notice of Claim at any time during the Applicable
Indemnification Period, but shall not be permitted to bring a Notice of Claim at
any time after the Applicable Indemnification Period (and any delivery or
attempted delivery of a Notice of Claim after such time shall be void and of no
force or effect). Notwithstanding anything contained herein to the
contrary, any Claims for Losses specified in any Notice of Claim delivered to an
Indemnifying Party during the Applicable Indemnification Period shall remain
outstanding until such Claims for Losses have been resolved or satisfied,
notwithstanding the expiration of the Applicable Indemnification
Period. Until the expiration of the Applicable Indemnification
Period, no delay on the part of an Indemnified Party in giving the Indemnifying
Party a Notice of Claim shall relieve the Indemnifying Party from any of its
obligations under this Article 9 unless
(and then only to the extent that) the Indemnifying Party is materially
prejudiced thereby.
9.5 Resolution of Notice of
Claim
.
Each Notice of Claim given by an Indemnified Party shall be resolved as
follows:
(a) If,
within thirty (30) days after a Notice of Claim is received by the Indemnifying
Party, the Indemnifying Party does not contest such Notice of Claim in writing
to the Indemnified Party delivering such Notice of Claim, the Indemnifying Party
shall be conclusively deemed to have consented to the recovery by the
Indemnified Party of the full amount of Losses specified in the Notice of Claim
in accordance with this Article 9. Such
recovery shall be limited, in the case of claims brought pursuant to Section 9.2(a), to
the forfeiture of that portion of the Escrow Fund having an aggregate value
equal to such Losses. For purposes of calculating the number of
Escrow Shares in the Escrow Fund to be offset against such Losses, each such
Escrow Share shall be valued at the Average Price. In the case of
claims brought pursuant to Section 9.2(b), such
recovery shall be by payment of additional shares of Parent Common Stock (valued
at the Average Price) equal to the value of such Losses to the Shareholders in
proportion to their respective Pro Rata Shares. Notwithstanding
anything in this Section 9.5(a) to the
contrary, where the basis for a claim against an Indemnifying Party is that an
Indemnified Party anticipates that it will incur or sustain Losses, no payment
or distribution will be made to such Indemnified Party for such Losses unless
and until such Losses are actually incurred, or properly accrued or
sustained.
(b) If the
Indemnifying Party gives the Indemnified Party delivering a Notice of Claim
written notice contesting all or any portion of such Notice of Claim (a “Contested Claim”)
(with a copy to the Escrow Agent) within the thirty (30) day period specified in
Section 9.5(a),
then such Contested Claim shall be resolved by either (i) a written settlement
agreement executed by Parent and the Shareholder Representative (a copy of which
shall be furnished to the Escrow Agent, if applicable) or (ii) in the absence of
such a written settlement agreement within thirty (30) business days following
receipt by the Indemnified Party of the written notice from the Indemnifying
Party (or, in the case of the Escrow Fund, the Shareholder Representative), by
arbitration between Parent and the Shareholder Representative in accordance with
the terms and provisions of Section
9.5(c). In the event that an Indemnified Party shall prevail
in any such arbitration, the Indemnified Party shall be entitled to recover, in
addition to any other rights it may have, the amount of Losses awarded in such
arbitration. Except as otherwise provided in Section 9.3(d), the
prevailing party’s recovery shall be limited, in the case of claims brought
pursuant to Section
9.2(a), to the forfeiture of that portion of the Escrow Fund having an
aggregate value equal to such awarded Losses. In the case of claims
brought pursuant to Section 9.2(b), such
recovery shall be by payment of additional shares of Parent Common Stock equal
to the value of such awarded Losses to the Shareholders in proportion to their
respective Pro Rata Shares except as otherwise provided in Section
9.3(d).
(c) Arbitration.
(i) Contested
Claims under Section 9.5(b)(ii)
shall be submitted for arbitration unless the amount of the Losses is at issue
in pending litigation with a third party, in which event arbitration shall not
be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by one arbitrator mutually agreeable to Parent and the Shareholder
Representative. In the event that within thirty (30) days after
submission of any dispute to arbitration, Parent and the Shareholder
Representative cannot mutually agree on one arbitrator, the matter shall be
settled by arbitration conducted by three arbitrators consisting of one
arbitrator selected by Parent, one arbitrator selected by the Shareholder
Representative, and one arbitrator selected by the two arbitrators so selected
by Parent and the Shareholder Representative. The arbitrator or
arbitrators, as the case may be, shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the arbitrator or
majority of the three arbitrators, as the case may be, to discover relevant
information from the opposing parties about the subject matter of the
dispute. The arbitrator or a majority of the three arbitrators, as
the case may be, shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys’ fees and costs, to
the extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that discovery
was sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the
arbitrator or a majority of the three arbitrators, as the case may be, as to the
validity and amount of any Contested Claim shall be binding and conclusive upon
the parties to this Agreement. Such decision shall be written and
shall be supported by written findings of fact and conclusions, which shall set
forth the award, judgment, decree or order awarded by the
arbitrator(s).
(ii) Judgment
upon any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. Any such arbitration shall be held in San Diego, California, if
Parent initiates the arbitration, and in Boston, Massachusetts, if the
Shareholder Representative initiates the arbitration, under the rules then in
effect of the American Arbitration Association. The arbitrator(s)
shall determine how all expenses relating to the arbitration shall be paid,
including without limitation, the respective expenses of each party, the fees of
each arbitrator and the administrative fee of the American Arbitration
Association.
9.6 Release of Escrow
Fund
.
Subject to the provisions of Section 9.1, the
Escrow Fund then held by the Escrow Agent shall be released by the Escrow Agent
to the Shareholders at 5:00 p.m., local time at Parent’s headquarters, on the
first year anniversary of the Closing Date (the “Escrow Termination
Date”); provided,
however, that the escrow period shall not terminate with respect to any
amount which, in the reasonable judgment of Parent, is necessary to satisfy any
unsatisfied claims specified in any Notice of Claim theretofore delivered to the
Escrow Agent and, in the case of claims made pursuant to Section 9.2(a), the
Shareholder Representative, prior to the Escrow Termination Date with respect to
facts and circumstances existing prior to the Escrow Termination Date and
unresolved prior to the Escrow Termination Date (“Unresolved
Claims”). On the Escrow Termination Date, the Escrow Agent
shall deliver the entire remaining portion of the Escrow Fund (other than
amounts set forth in any such pending Notices of Claim to satisfy any Unresolved
Claims), as described above, in the following manner: (i) first, to the
Shareholder Representative for any Shareholder Representative Expenses, and (ii)
then to the Shareholders in proportion to their respective Pro Rata Portions of
the remaining portion of the Escrow Fund. Thereafter, as soon as any
such Unresolved Claims have been resolved, the Escrow Agent shall deliver the
remaining portion of the Escrow Fund, if any, no longer required to satisfy such
previously Unresolved Claims in the manner set forth in the preceding
sentence.
9.7 Third-Party
Claims
.
In the event Parent becomes aware of a third party claim (a “Third Party Claim”)
which Parent reasonably believes may result in a demand for indemnification
pursuant to this Article 9,
Parent shall notify the Shareholder Representative of such claim, and the
Shareholder Representative shall be entitled on behalf of the Indemnifying
Parties, at its expense, to participate in, but not to determine or conduct, the
defense of such Third Party Claim. Parent shall have the right in its
sole discretion to conduct the defense of, and to settle, any such Third Party
Claim; provided,
however, that except with the prior written consent of such settlement by
the Shareholder Representative (which consent shall not be unreasonably withheld
or delayed), no settlement of any such Third Party Claim with third party
claimants shall be determinative of the amount of Losses relating to such
matter. In the event that the Shareholder Representative has
consented to any such settlement, the Indemnifying Parties shall have no power
or authority to object under any provision of this Article 9 to
the amount of any Third Party Claim by Parent against the Shareholders with
respect to such settlement.
9.8 Shareholder
Representative
(a) The
approval by the Shareholders of the principal terms of the Merger shall
automatically and without any further action on the part of any Shareholder
constitute the appointment of the Shareholder Representative as the agent and
attorney-in-fact for each of the Shareholders, to give and receive notices and
communications, to authorize payment to any Indemnified Party from the Escrow
Fund or on behalf of the Shareholders in satisfaction of claims by any
Indemnified Party, to object to such payments, to bring any claim for
indemnification on behalf of any Company Indemnified Party, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, to assert, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of arbitrators
with respect to, any other claim by any Indemnified Party against any
Shareholder or by any such Shareholder against any Indemnified Party or any
dispute between any Indemnified Party and any such Shareholder, in each case
relating to this Agreement or the transactions contemplated hereby, and to take
all other actions that are either (i) necessary or appropriate in the judgment
of the Shareholder Representative for the accomplishment of the foregoing or
(ii) specifically mandated by the terms of this Agreement. Such
agency may be changed by the Shareholders from time to time upon not less than
thirty (30) days’ prior written notice to Parent; provided, however, that the
Shareholder Representative may not be removed unless holders of a majority in
interest of the Escrow Fund agree to such removal and to the identity of the
substituted agent. A vacancy in the position of Shareholder
Representative may be filled by the holders of a majority in interest of the
Escrow Fund. No bond shall be required of the Shareholder
Representative, and the Shareholder Representative shall not receive any
compensation for his services. Notices or communications to or from
the Shareholder Representative shall constitute notice to or from the
Shareholders.
(b) The
Shareholder Representative shall not be liable for any act done or omitted
hereunder as Shareholder Representative while acting in good faith and in the
exercise of reasonable judgment. The Shareholders on whose behalf the
Escrow Fund was constituted shall indemnify the Shareholder Representative and
hold the Shareholder Representative harmless against any loss, liability or
expense incurred without gross negligence or bad faith on the part of the
Shareholder Representative and arising out of or in connection with the
acceptance or administration of the Shareholder Representative’s duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholder Representative (“Shareholder Representative
Expenses”). Promptly after the Termination Date, and subject
to Section 9.6, any shares
of Parent Common Stock that remains available in the Escrow Fund shall
constitute security for the indemnification obligations set forth in the
immediately preceding sentence and shall be released to the Shareholder
Representative upon delivery by the Shareholder Representative to Parent and the
Escrow Agent prior to the Termination Date of a certificate signed by the
Shareholder Representative: (1) stating that the Shareholder Representative is
entitled to such indemnity payment, (2) specifying in reasonable detail the
basis of such claim, and (3) accompanied by any additional documentation
evidencing the validity of the Shareholder Representative Expenses reasonably
requested by the Escrow Agent, Parent or any Shareholder. A decision,
act, consent or instruction of the Shareholder Representative shall constitute a
decision of the Shareholders and shall be final, binding and conclusive upon the
Shareholders; and the Escrow Agent and Parent may rely upon any such decision,
act, consent or instruction of the Shareholder Representative as being the
decision, act, consent or instruction of the Shareholders. The Escrow
Agent and Parent are hereby relieved from any liability to any Person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Shareholder Representative.
ARTICLE 10
TERMINATION, AMENDMENT AND
WAIVER
10.1 Termination
.
Except as provided in Section 10.2, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual
agreement of Parent and the Company;
(b) by Parent
or the Company, if the Closing Date shall not have occurred by April 11, 2008;
provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not
be available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this
Agreement;
(c) by Parent
or the Company, if the Requisite Shareholder Approval has not been obtained by
written consent of the Company Shareholders or at a meeting of the Company’s
shareholders duly called and held in accordance with the Company’s Articles of
Incorporation, or any postponement or adjournment thereof; provided, however, that the right to
terminate this Agreement under this Section 10.1(c)
shall not be available to the Company or if its action or failure to act has
been a principal cause of or resulted in the failure to obtain the Requisite
Shareholder Approval at a meeting of the Company’s shareholders and such action
or failure to act constitutes a breach of this Agreement;
(d) by Parent
or the Company, if (i) a court of competent jurisdiction or other
Governmental Authority shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger or any other material
transaction contemplated by this Agreement, or (ii) any statute, rule,
regulation or order is enacted, promulgated or issued by any Governmental
Authority that would make consummation of the Merger illegal;
(e) by
Parent, if (i) it is not in material breach of its obligations under this
Agreement and (ii) there has been a breach of any representation, warranty,
covenant or agreement of the Company or the Shareholders contained in this
Agreement such that the conditions set forth in Section 8.2 would not
be satisfied at the time of such breach and such breach has not been cured
within ten (10) business days after written notice thereof to the Company or the
applicable Shareholder; provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured;
(f) by the
Company, if (i) none of the Company or the Shareholders is in material breach of
its obligations under this Agreement and (ii) there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement such
that the conditions set forth in Section 8.3 would not
be satisfied and such breach has not been cured within ten (10) business days
after written notice thereof to Parent; provided, however, that no
cure period shall be required for a breach which by its nature cannot be cured;
or
(g) by
Parent, if any shareholder of the Company shall exercise dissenters’ rights
under the CGCL.
10.2 Effect of
Termination
.
In the event of termination of this Agreement pursuant to Section 10.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Merger Sub, the Company or the Shareholders,
or their respective officers, directors or shareholders, if applicable; provided, however, that (i) each party
hereto shall remain liable for any breaches of this Agreement prior to its
termination; (ii) the provisions of Section 7.5
(Confidentiality), Section 7.6 (Public
Disclosure) and Section 7.10
(Expenses), Article 11
and this Section 10.2 shall remain
in full force and effect and survive any termination of this Agreement pursuant
to the terms of this Article 10;
and (iii) in the event of a termination of this Agreement by Parent pursuant to
Section 10.1(e), the
Company shall within five (5) days following the date of such termination pay
Parent $75,000 as liquidated damages for Parent’s reasonable expenses (including
reasonable attorneys’ and accountants’ fees and expenses) incurred in connection
with the transactions contemplated herein; and (iv) in the event of a
termination of this Agreement by the Company pursuant to Section 10.1(f), Parent
shall within five (5) days following the date of such termination pay the
Company $75,000 as liquidated damages for the Company’s reasonable expenses
(including reasonable attorneys’ and accountants’ fees and expenses) incurred in
connection with the transactions contemplated herein.
10.3 Amendment
.
The parties hereto may amend this Agreement at any time solely by executing an
instrument in writing signed by all the parties hereto.
10.4 Extension and
Waiver
.
At any time prior to the Effective Time, Parent, the Company and the
Shareholders may, to the extent legally permitted, (i) extend the time for
the performance of any of the obligations of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL
PROVISIONS
11.1 Notices
.
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial messenger or courier
service, or mailed by registered or certified mail (return receipt requested) or
sent via facsimile (with acknowledgment of complete transmission) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice); provided, however, that notices sent by
mail will not be deemed given until received:
(a) if to
Parent, Merger Sub or Surviving Corporation to:
Implant
Sciences Corporation
000
Xxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention: President
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
with a
copy to:
Ellenoff
Xxxxxxxx & Schole LLP
000 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxx
Xxxxxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
(b) if to the
Company, to:
Ion
Metrics, Inc.
00000
Xxxxxxxx Xxxxxx Xxxx, Xxxxx 00
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attention: President
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
with a
copy to:
Xxxxxx
Legal Works
00000
Xxxxxxxx Xxxxx
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx
X. Xxxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
(c) If to the
Shareholders, to:
Their
addresses set forth on Schedule 11.1
attached hereto
(d) If to the
Shareholder Representative, to:
Xxxxx X.
Xxxxxx
00
Xxxxxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Telephone
No.: (000) 000-0000
11.2 Counterparts
.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
11.3 Entire
Agreement
.
This Agreement, the Exhibits hereto, the Disclosure Schedule, the Confidential
Disclosure Agreement, and the documents and instruments and other agreements
among the parties hereto referenced herein constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof, including the binding term sheet between
Parent and the Company dated February 12, 2008.
11.4 Third Party
Beneficiaries
.
No provisions of this Agreement are intended, nor shall be interpreted, to
provide or create any third party beneficiary rights or any other rights of any
kind in any client, customer, employee, affiliate, shareholder, partner or any
party hereto or any other Person unless specifically provided otherwise herein
and, except as so provided, all provisions hereof shall be personal solely
between the parties to this Agreement except that Sections 7.8, 9.1 and 9.2 are intended to
benefit such holders and the other Persons described therein.
11.5 Assignment
.
This Agreement shall not be assigned by operation of law or
otherwise.
11.6 Severability
.
In the event that any provision of this Agreement or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal, void
or unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other Persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto.
11.7 Other
Remedies
.
Any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
11.8 Governing
Law
.
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
11.9 Waiver of Jury
Trial
.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY
PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
11.10 Specific
Performance
. The
parties hereto agree that irreparable damage would occur if any provision of
this Agreement were not performed in accordance with the terms hereof and that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement, in addition to any other remedy to which they are
entitled at law or in equity.
11.11 Legal
Representation. Each of the Shareholders and the Shareholder
Representative, by his or its execution of this Agreement, hereby acknowledges
that he or it has not been represented by counsel to the Company or counsel to
any other Shareholder in connection with the transactions contemplated
hereunder. Each of the Shareholders and the Shareholder
Representative has had a reasonable opportunity to consult his or its own
independent counsel with respect to the transactions contemplated by this
Agreement, including, without limitation, the Ancillary Agreements to be signed
by such Shareholder or Shareholder Representative and the releases and waivers
required by this Agreement. Each Shareholder and the Shareholder
Representative is making his or its own decision with respect to the execution
of this Agreement, the Ancillary Agreements to which he or it is a party and
participation in the transactions contemplated by this Agreement and such
Ancillary Agreements.
[Remainder
of page intentionally left blank.]
- -
IN
WITNESS WHEREOF, Parent, Merger Sub, the Company, each Shareholder and the
Shareholder Representative have caused this Agreement to be executed as of the
date first above written.
|
IMPLANT
SCIENCES CORPORATION
By:
/s/ Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title:
CEO
|
|
|
IMX
ACQUISITION CORP.
By:
/s/ Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title:
President
|
|
|
ION
METRICS, INC.
By:
/s/ Said Boumsellek
Name:
Said Boumsellek
Title:
President
|
|
|
SHAREHOLDER
REPRESENTATIVE
Xxxxx
X. Xxxxxx
|
|
|
SHAREHOLDERS:
Xxxxxx
X. Xxxxxx
Xxxxxx
Xxxxx
Said
Xxxxxxxxxx
Xxxxx
Xxx Xxxxxx, Trustee 1950 Trust
|
SIGNATURE
PAGE TO
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
INDEX
OF EXHIBITS AND SCHEDULES
Exhibit Description
Exhibit
A Escrow
Agreement
Exhibit
B Lock-Up
Agreement
Exhibit
C Xxxxx
Consulting Agreement
Exhibit
D Assignment
and Assumption Agreement
Exhibit
E Board
Observer Rights Agreement
Exhibit
F FS
Agreement
Exhibit
G X.
Xxxxxx Employment Agreement
Exhibit
H Boumsellek
Employment Agreement
Exhibit
I Inventory
Schedule Description
Appendix
I Disclosure
Schedule
Appendix
II
Parent Disclosure Schedule
Schedule
11.1 Schedule
of Shareholders and Addresses
